A guide to Real Estate Agent Fees and Commissions

When you set out to sell a property you’ve got to have a clear picture of which Real Estate Agent fees will apply and how much they are.

Real Estate Agent fees are deregulated in Victoria, so Agents can vary their rates, driven by market competition. Victorian Real Estate Agent fees are actually considered Australia’s lowest.

However, in Victoria regional and rural areas have higher real estate agent fees, because properties usually take more time to sell and home values aren’t as high. The commission rate is likely to be between 2.5% and 3%.

Location affects real estate agent fees. Inner urban areas, which have the most Agents competing and the easiest to sell properties have the lowest rates. Outer metro Melbourne has higher Real Estate Agent fees due to less buyer demand.

Highly desirable suburbs South Melbourne and South Yarra have a commission rate from 1.35% to 1.89%, which is Melbourne’s lowest.

Mid-range suburbs between 10 and 20 kilometres out have higher Real Estate Agent fees. Oakleigh and Burwood sit at around 1.9% to 2.2%. Heading out further to suburbs like Doncaster, Epping or Reservoir and the real estate agent fees are higher again around 2.21% to 2.6%. Beyond that In Melbourne’s outer ring rates will go as high as 3.9%.

So Real Estate Agent fees can go up in increments based on distance from the CBD. But there are exceptions at both ends of the scale for some properties.

For example, Docklands can be considered CBD but its fee rate is high at around 2.81%. In the Hoddle Grid it’s also at the high end around 2.31%. The higher figures correlate with a perception of oversupply in these districts.

How do Real Estate Agent Fees stack up?

So for metro Melbourne the average Real Estate Agent fees would be about 2.14%. With a $500,000 property that means $10,700. Or for a 1M property it’s $21,400. It really starts stacking up.

Agents try to average out their fees between 10 – 17K depending on the firm and the suburb they cater for.

Commissions are affected by the value, the location and the property style. The fee can even vary based on how easy the Agent figures the property seller is likely to be to work with.

And when the market is slow it usually means agents charge more too.

The higher the property price, the lower the commission percentage figure. Otherwise, owners of high-end properties would be shelling out huge sums to Agents.

So the reality is, there is an average commission figure (10 – 17K) and then beyond that there are quite a few factors that can apply upward or downward pressure to fees and commissions. This means if you are a seller there is some scope to negotiate.

How to structure an incentive within your commission?

Many sellers choose to structure the commission in order to provide an incentive for the Real Estate Agent.

For example, offering 1.5% rate for a 1M sale price, then 10% bonus on a figure that goes higher than that. i.e. The agent gets $15,000 for a million dollar sale, then an extra $10,000 if they achieve 1.1M. So the agent gets $25,000 in total from a 1.1M sale.

An incentive has to be earned.

One pitfall to avoid is that you should never place an incentive at your reserve price. Strategically, the reserve price operates as an important ‘trigger point’ in the auction process and should not be encumbered by connections with an incentive payment to a Real Estate Agent. The reserve price moves you forward from point A towards point B, where A is somewhere near your least acceptable price and B is your best acceptable price and beyond.

Any incentive for a Real Estate Agent should be placed upwards of point B, that is, towards the highest end of the sale price zone. Remember a reward should be for an outstanding effort and therefore sale price achieved. Not just a given.

As the vendor you are after the best net result. Sometimes the particular Real Estate Agent you want might charge you $10,000 more than others, but if they can get $20,000 more for the property than other agents, you’ve produced a net $10,000 gain.

The challenge is identifying the right agent who will most likely do a better job.

Vendor Marketing – Melbourne’s most qualified vendor advocates, has strategies around determining who the best real estate agents are and negotiating the real estate agent fees within your favor.

If you’d like more information regarding your particular circumstances and property sale, simply call 1300 435 435. A quick chat will give you a good idea of the options – and the benefits!