Melbourne has ranked number one as the most liveable city in the world, for seven years in a row. Melbourne is known to many as the quirkiest and coolest city in Australia, with an amazing nightlife scene and a busy CBD, the city is well deserving of the number one ranking. The capital city of Victoria, Vic is also known as The Garden State and Melbourne really showcases this with an array of public parks and decorated gardens all over the city. The city is hiving with incredible eateries, art, culture and a pretty reasonable transport system. With such great infrastructure in place and the excessive growth that has occurred over the last decade, it’s a pretty good time to be a homeowner looking to sell in Melbourne.
Melbourne’s median house price increased by 11.3% in 2017 – sitting at $903,859 in December 2017. (Source: Domain Group House Price Report, December 2017) With so many people relocating there every day (in 2016 that number was 400 a day), the economy is thriving. That’s great news if you are selling your home in Melbourne. Real estate agent fees in both Victoria and Melbourne are amongst the lowest in Australia.
How do real estate commissions and fees work in Melbourne?
Melbourne real estate agents create their commission rates based on supply and demand. Melbourne, like the rest of Victoria, operates on a system of deregulated fees. Deregulated fees allow an agent to set up their own structure. The good news is Melbourne is currently seeing it’s biggest population increase since the 1940’s gold rush. As a result of more people, we are seeing more agents. More agents mean more competition.
As a result, we see a lower charge for commissions in order for agents to compete for your business. Agents need to compete for your business and so lowering the price of commission is one way they will do this in Melbourne.
Melbourne is home to many suburbs and the location of your property within the city will have an effect on the commission you pay, as well as the condition of the property and the property type. With this in mind, the best way to find out how commissions will work on your property sale is to do some homework. Comparing local agents will help you understand how different agents charge commission, as well as giving you an understanding of their work and how suitable they are for selling your property.
It’s also a good idea to understand that in real estate, the terms fee and commission are often charged separately.
Here are some definitions to help clarify:
Commission: This is the term usually referring to the term to the percentage allocation of the total cost of the property sold.
Fee: This is a term that is commonly associated with marketing, advertising and administrative costs.
It’s a good idea to have a conversation with your agent and define what costs fall under which term. This way, there will be no confusion or last-minute surprise costs.
What is the average commission rates in Melbourne?
The average commission rate in Melbourne ranks at 1.99% and amongst the lowest of the capital city averages. The below charts highlights Melbourne’s ranking alongside the remainder of Australia’s capital cities. This isn’t a big surprise given what we know about the rate of Melbourne’s growth. We would expect there to be a competitive element amongst real estate agents in the city that is driving down the commission and fees rate.
City Average Commission
Commission Rates May 2018 based on a $500,000 property sale
Average real estate agent fees are influenced by a range of factors and vary depending on a suburb’s location, and proximity to services, amenities and lifestyle interests.
Melbourne East, Melbourne West and Melbourne North, and Melbourne Bayside all have average commission around 2%. This is due to increased competition in these residential areas. Melbourne’s most popular, and fastest growing suburbs see agents charging some of the lowest fees.
Areas like Melbourne North have average rates of 1.89% but further out, suburbs situated 50 km outside Melbourne like Cranbourne North have average commission rates to 3.3%.
While there is a clear correlation between proximity to the Melbourne CBD and average real estate agent fees, rates will vary from suburb to suburb, and there are exceptions on both ends of the scale.
Negotiating fees and commissions in Melbourne
With such competition amongst real estate agents, you are in a stronger position to negotiate your fees. Knowing the cities average will help give you a guideline on commission rates but of course, your property type, the size of your home and the suburb will all play a part in how much commission you will pay. In order to ensure you are in the best possible position to negotiate, you should also have sound knowledge around how an agent will charge commission.
Commission type: Fixed rate or Tiered percentage.
Generally speaking, your real estate agent will charge commission in one of two ways.
Fixed rate agreement
A fixed rate is calculated by agreeing on a percentage of the total sale of the property.
This fixed rate approach means that the fee you agree to pay will never change, regardless of the end sale price of your property, the benefits of operating this way is that both parties have peace of mind and the security of an agreed amount.
Some people may find this method can hinder the estate from striving for the highest price and potentially selling the property to quickly.
The tiered percentage approach is more common for people to use when they are selling a larger house in a popular area and is generally believed to incentivise the agent. Tiered percentage operations on a sliding scale, 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.
The potential disadvantage of this is that you may end up paying more commission than you had initially believed you would. There is no certainty around what you will pay in commission and this can cause unease.
Whatever commission structure you decide to follow, make sure both you and your agent have provided full visibility on your agreement. In order to do so, it’s a good idea to ensure everything you agree is in writing. Selling a house can be challenging and often we forgot minor details and so confirmation via the written word is always helpful.
Top tips for selling your home in Melbourne
We have helped thousands of Aussies sell their home and we’ve learnt a thing or two along the way. Here are some tips to help you with the process of selling your home in Melbourne:
A real estate agent’s fee is certainly a key consideration when selecting an agent, however, it should not be the only one. Agents base their fee on a range of criteria, such as their experience, marketing strategy and expertise, and these factors should be researched and considered with equal weight.
Real estate agent fees across Melbourne will generally be lower the closer your property is located to the CBD. In order to get a good idea of agent fees in your suburb and what services they can offer you, it’s worth comparing several local agents. This way you’ll have all the information needed to make an informed decision.
Your agent should have a sound marketing plan that they are willing to share with you. Studies have shown that a sign outside your home is one of the most effective ways to sell your home. Although traditional and potentially an “old school” way to sell, your agent should know how to create the best signage possible. In addition to nailing traditional marketing strategies, your agent should have a strong online plan. Your real estate agent should have a great marketing plan and be ready and willing to share it with you.
Proximity to amenities, like local schools and shopping centres are among buyer’s top priorities, so it’s important to select an agent that has a deep local knowledge of your area and its features.
We know that hidden fees are a concern for everyone when selling your home. At LocalAgentFinder, our comparison tool is completely free for homeowners. The agent you choose will only pay LocalAgentFinder a referral free after successfully selling your property.
Want to find out exactly what agents are charging in your area? LocalAgentFinder is an impartial, online comparison service that lets you compare a wide range of local agents to find the agent that’s right for you. Get started now, so you can make the right decisions, right from the start.
Fees & Commissions by City
To determine average commission rates, LocalAgentFinder took the average commission of all active agents respectively on 1 May 2018. This included agents with tiered and fixed commission structures based on a $500,000 selling price. This page was updated on 4th May 2018.