agent's commission tips

Setting the most effective agent’s commission

Have you noticed that there seems to be a growing number of people who seem to be determined to convince you, (whether on social media, on TV or in the papers), that they and only they can tell you exactly what the right amount of commission is to pay a real estate agent? Real estate agent’s commissions are one of the most common question people ask about when selling their property. However, while this can obviously be an important factor when selling your home, one of the biggest mistakes you can make when choosing an agent is to base the decision solely on the commission they charge.

Our experience has taught us that you should always choose the best agent in your area, then negotiate a suitable commission rate with them. In fact, you will find that the agent who offers the cheapest commission rate is inevitably not the best agent for the job!

Here in Victoria all agent’s commissions are negotiable, depending on the level of service and the result you want. As a general guide, a real estate agent’s commission tends to range between 1.5% and 2.5% in the metropolitan area and from 2.0% to 3.0% in regional areas. Obviously, there are variations to these numbers, and it is important to remembered that agent’s commissions can be structured as a flat fee, a tiered percentage depending on the result, or with an incentive above a key target figure.

As an example, let’s suppose you are selling a property with price expectations around $800,000. One option might be to set a flat commission rate of 2%, meaning the agent’s fee would be $16,000 once they negotiate a sale at your approved price. Another option might be to set a commission rate of 2% up to $800,000; 2.2% for a sale between $800,000 and $825,000; and 2.4% for a sale above $825,000. This provides an extra incentive for the agent to push for a result that exceeds your expectations. An alternative approach might be to set a commission rate of 2%, plus 10% of any amount that the agent achieves above your target price of $800,000.

As you can see from these examples, there is no “one size fits all” answer to setting the right commission. The key is to ensure that the agent is fully incentivised to get you every last dollar that they can, and there are several different ways to do that. In fact, one of the roles of the team at Ian Reid Vendor Advocates is to help you choose the best local agent first, then negotiate on your behalf to ensure that you don’t end up paying a higher commission than you need to.

Keep in mind that there can be big differences in performance between the cheaper agents in your area, and the agents who earn better commission rates. By employing the best marketer and negotiator, you can be confident of ending up with the best possible price, not just an acceptable price. The difference can mean a great deal more in your pocket, and far more than the slight difference in commission that choosing the best agent might involve.

Securing the right agent’s commission is just one of the areas that Ian Reid Vendors Advocates can assist you when selling. You’ll find lots more of them detailed in our free booklet, Fatal Real Estate Traps Exposed, so why not download a copy while you’re here?

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