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Real estate agent commissions – how much should you pay?


How much you should pay for real estate agent commission can come down to whether you’re selling a $4 million home or an $800,000 home.

Agent commissions are separate to agent fees, which tend to cover the costs for advertising and marketing your property. They are one of the single greatest costs for selling property.

What’s the typical real estate agent commission?

Agent commissions range between 1.6 and 4 per cent of a property’s sale price, with your more typical commissions sitting between 2 and 3 per cent (between $16,000 and $24,000 for a property valued at $800,000).

Commissions are set by individual agents and vary according to the agent and the state of the local housing market. In rural areas, for example, commissions can be higher because there are less agents competing against each other to drive averages down.

Fixed vs tiered agent commissions

A fixed commission tends to be more common, where you multiply the commission percentage by the property sale price.

For example, a property that sells for $800,000 with a commission percentage of 2.5 per cent would come to $20,000 ($800,000 x 2.5% = $20,000).

Some agents will agree to a tiered commission system as an incentive to achieve a higher sale price. For example, they may agree to a lower percentage for the value up to the reserve price (1-2 per cent) and a higher percentage (such as 6 per cent) for every $1,000 they achieve over the reserve.

Whether a tiered commission structure is an effective incentive is questionable because in many cases over half of the commission goes to the agency and not the agent.

Why are real estate agent commissions so high?

Agent commissions are not regulated in Australia but are determined by the market. While agents claim to make up their high commissions in sale value, this argument is debatable with so many resources and avenues now available to sellers to sell their own property privately.

Commissions should reflect the qualifications, experience and level of service agents provide. Unfortunately, this isn’t always the case. To begin your journey as a real estate agent in Australia, you only need to complete a certificate IV in property, which can take as little as 18 weeks. In some states such as NSW you can work as a real estate agent (under conditions) with just a certificate of registration which can be completed in just 5 days. While many real estate agents have several years’ experience on top of this, they don’t always have the best reputations. According to one Roy Morgan report, only 7 percent of Aussies rank agents highly for their ethics and honesty. In fact, they are the third least trusted profession in Australia.

What happens if your home doesn’t sell?

When negotiating your sales terms with an agent, it’s not a bad idea to ensure you have for a ‘no sale, no fee’ contract, so you’re not obligated to pay commissions or outgoings in the event your property fails to sell. Always check whether there are any hidden charges within a contract before signing.
You should also have a solid understanding of what your rights are if the property doesn’t sell, if you aren’t happy with the performance of the agent, or you decide you’d like to sell with someone else. Under some exclusive agency agreements, an agent could still be entitled to a commission if you sold the property privately after the agreement term expired.

Other fees associated with selling property

On top of agent commissions, there are several other property sales fees you should be aware of. These include:

  • Legal fees
  • Marketing and advertising
  • Bank fees
  • Mortgage exit fees
  • Capital Gains Tax (for investment properties)
  • Outstanding council rates

All these fees accumulate to eat into your sale profit margin.

Learn more about real estate comissions

Using an agent assisted sales platform to sell privately

Using an agent assisted sales platform like PropertyNow can help you recuperate a lot of these costs. PropertyNow offers the opportunity to sell your property privately online for a competitive fixed fee, saving thousands in agent commissions. We are kind of like a hybrid between traditional agencies and for sale by owner websites. Our difference is you get to sell your own home privately online with our full support as licensed real estate agents.

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