As a seller’s agent, you are paid to sell a property. You are also paid for producing a buyer so your commission is dependent both on how much competition there is for the house and whether or not they are willing to pay top dollar for it.
The more expensive the house, the higher the sales price, the greater your reward as an agent. The less expensive the house, the lower the sale price, the bigger your bonus!
Agent fees cover things such as advertising, photography, legal documents, appraisal reports and getting the home ready for showings. All of these costs add up which means the better agents have longer lists of extras than their peers that may make the difference between earning a small or large amount per transaction.
In this article we will look at some average real estate commissions in Queensland. We will then compare those numbers with a list of Sydney houses to see just how big of a margin of error there is in the figures given.
Real estate agents typically get 1% (or 2% depending on who you speak to) of the selling price for their services. This article uses 4% as our benchmark because it is a comfortable distance from either side of zero (no commission).
Sellers usually receive 5-7% while buyers usually enjoy 6%-8%. These averages can vary quite a bit depending on what area of Australia the house is located in and whether or not there was competitive bidding.
What does it mean?
Brokerage is paid to act as an intermediary between you, the buyer or seller of real estate and the source of money to close the sale. This includes paying for advertising, showing the property, gathering information about it, negotiating on your clients’ behalf, etc.
The commission that a broker earns depends on two things: how much they charge their client for services and what percentage they save his/her client through smart negotiation.
Brokers are compensated by both the person giving them business (the buyer or seller) and by the other brokers working for those customers (pay-per-seller or pay-per-buyer commissions). The more people their employer sells a house to, the higher their income!
There are three main types of brokerage in Australia: selling agent, investment advisor and residential conveyancer.
Mostly, sellers use selling agents due to the cost effectiveness of this type of brokerage. Investing in a selling agency package can easily spend several thousand dollars per year depending on the size of the home being sold. This expense is typically covered by the agent, but some have overhead fees which must be included.
Conveyancers only work with properties being transferred from one owner to another so this service is not needed unless there will be no other broker involved.
Investment advisors usually earn higher incomes than buying agents or conveyancers because they require longer term relationships with less frequent contact.
How much is it?
As mentioned earlier, there are two major components of real estate commission– listing agent fees and buyer’s agents Fees. The fee for a listing agent is typically determined by the number of days that they use to sell a property and their sales compensation which includes a broker’s fee and an agency fee.
The broker’s fee is usually fixed at 4% of the sale price and the agency fee varies from place to place but is normally around 1%-2%. There are some instances where the percentage can go up to 3%, this only happens if you have very high level expertise or if your services are particularly valuable to the seller.
So altogether we are looking at 5 – 8% as a general rule.
Are there taxes?
There are always expenses involved in buying or selling a house, but one of the biggest is actually not mentioned much – tax!
In fact, you could say that having enough money to buy a home is almost impossible if you don’t account for the tax burden first. It can easily add up to more than the commission you earn from your sale!
And while some states do have a gross income tax, most counties in Queensland (where most homes are located) only levy an occupancy tax. This is usually done at around 2% of the property value per year, so it isn’t too bad really.
But what about capital gains tax? Unfortunately, this is another expense that many people forget about when talking about real estate investing.
This is how it works. When you sell a property, you’re taxed on how much profit you made compared to what you paid for the asset. The higher the price difference, the bigger the taxable gain.
Most experts agree that the average investor will pay around 10-15% CGIT once they reach retirement age. So, even though it doesn’t seem like a lot now, it adds up quickly.
Fortunately, we’ve compiled all the information you need to stay under the radar. Check out our article below to learn everything you need to know about real estate commissions in Australia.
Who pays?
As mentioned earlier, there are two main groups that real estate agents pay commission to: sellers and buyers. The difference is how much each party pays their agent!
Sellers’ commissions are usually the same as buying a house- they pay an agency 2% of the selling price. This is also called listing agent’s commission or seller’s commission.
This 2% typically includes paying for the broker (the person who handles negotiations with the buyer), any other agents working within the property, and the legal fees related to transferring ownership of the home.
Buyer’s commission is only paid when you buy a house through an agent. It varies depending on what type of agent you use, but most agree it should be 10%– this is your agent’s fee.
What are some tips for clients?
As mentioned before, your seller may not disclose all of their property’s details to you. They could be keeping certain information private so they can get more money!
As agents, we earn our fees through commission. The higher the sale price, the greater our income!
If there is no disclosure about the home being built then this could mean that they don’t have access to the plans or know what materials were used.
It also means they won’t tell you how much land the house sits on which makes it difficult to determine its true size. This comes down to them as sellers wanting to retain control over the marketing process.
We recommend always asking if the house has been listed and what days and hours they go to work every day. If they say yes then ask what agency they use and whether they advertise with them.
This way you will at least have some idea of how competitive the market is for this property.
What are some tips for agents?
As an agent, how much you earn really depends on your efforts to ensure that your house is sold as quickly as possible. The faster you sell your home, the higher your commission!
There are several things that can affect the speed of sale including the property being marketed correctly, having enough pictures and evidence to show off the features of the house, good timing of showing the house, and knowing when to hold (and price) up for a potential buyer.
If you’re ever feeling like there just isn’t anything going on with the house, maybe it’s time to revamp your marketing strategy or try something new.
It’s totally normal to feel overwhelmed at times. It takes a while to find your groove as a real estate agent, but don’t worry, it happens for most people.
When should I get a contract?
Before you even approach a seller with a listing, you need to know how much commission they will pay their agent. This is very important as it can make a big difference in whether or not they agree to work with you!
Most agents have what’s called a designated broker (or agency) who handles all of their sales. The broker gets a “commission percentage” for each property they list and sell. This is usually done monthly, so every time a house sells the agent earns more money.
The higher the sale price, the bigger your check!
It’s very difficult to find out how much the broker’s employer pays them per transaction, but we do know that the lower the selling price, the less money they earn.
How do I get started?
As a real estate agent, your earnings are not constant! It is normal to experience times when you encounter no transactions or very few. This is totally okay as these are typically low-demand seasons for the market and it will eventually turn around.
When this happens there is less opportunity to earn revenue through commissions and income can easily be lost if you have to take time off to try and find new business.
It’s important to understand that although it may feel like you’re running out of things to do, this is actually a good thing because it means you’ve put into place systems to help you stay productive during low activity periods.
There are several ways to manage your business during such times so don’t worry about being idle — instead use this downtime to focus on other areas of the business.
