Weekly Property Review: How Fixed Are Marketing Agency Commission Fees?

IF a property is worth exactly what someone is willing to pay, should agency fees be considered the same, with different companies bringing their individual strengths to the sales process?

The level of commission can be a mysterious part of selling a property and although a number of agents were approached, many were reluctant to discuss the issue fearing it would show competitors their hand.

In this week’s property review, we bring you answers from three leading industry players.

Each Australian state has strict rules and standard conditions that all estate agents must comply with. However, there are some permitted variations in terms, including fees and marketing strategies.

A commission is agreed when the agency is officially appointed to sell a property.

Typically, most vendors seek offers from two or more agents. According David Goodfellow of CBRE Agribusiness, it is a question of testing the knowledge of the agent on the current market, its relations with the buyers and its commitments to follow the rules of a legal agent.

David Goodfellow

Mr Goodfellow said the agreed commission rate was linked to the size of the transaction, the likely competition for the property (ease of sale) and the preparation of the seller.

“Every transaction is different and depends on the size of the transaction and the people involved,” he said.

“On small deals, we might see rates as high as 3%, but on big deals ($100 million and above), they might drop as low as 0.5%.”

Mr Goodfellow said that ultimately officers are trying to recoup their time costs.

“Sometimes transactions are done very quickly and easily and the agent does very well, but the seller also does very well. Other times, the agent’s fees do not reflect the considerable time and effort required to close lengthy transactions. »

“Some deals never close, and in those cases the agents get nothing back, so there’s always a little risk – but that’s business,” he said.

Mr Goodfellow said that in the case of CBRE, he charged a commission based on the success of transactions.

Rather than having a fixed fee structure, the company works on tiered or tiered fees, so the agreed percentage is quite low up to a base value (selling price), but only goes up at a rate percentage higher than when a premium result is achieved.

“This creates a ‘win-win’ situation, with the agent only receiving high fees when the seller’s expectations have been greatly exceeded,” he said.

Mr Goodfellow said lower commission rates are usually charged for larger or much easier to sell properties.

“Typically this happens when sellers are well prepared to sell their property (in terms of information and presentation) and agents already have buyers lined up to compete and therefore properties do not need a lot of publicity.”

Conversely, Mr Goodfellow said higher rates could apply when a seller needed to sell quickly.

“These sellers are unprepared and may not want their property advertised publicly. They depend on the agent knowing the property, identifying potential buyers and convincing them to meet the appropriate deadlines.

He said that with rising house prices, sellers might expect percentage commission rates to come down a bit.

“While commissions have fallen due to competition in the real estate market, labor costs are rising and industry compliance is more important, which also drives costs.”

Mr Goodfellow said corporate agents can generally charge lower fees than smaller agencies due to their size and ability to spread overhead over a greater number of transactions.

Get what you pay for

An industry veteran who was willing to be interviewed but whose name was not cited in this article said there are no standard terms when it comes to selling grazing property .

“Commissions paid on all transactions are negotiable. I think sellers are more concerned with the relationship and communication with their agents than the commission,” he said.

It has been said that there is a risk of “getting what you pay for” with reduced commission perhaps equating to a lower level of service, agent buy-in, investment of time and energy .

The veteran admitted it was normally a bad start to a relationship if an agent was appointed on a fee-only basis.

“In my opinion, it’s the culture of any company that determines where the commissions will be – should it be a percentage or a lump sum for success.”

Sometimes a buyer may make a successful offer before the inspection process has even begun, and as a result sellers may wonder whether the full agency commission should apply because the agent does not basically made no move.

The agent wondered if a buyer would have taken action if the property had not started a marketing program with an auction date.

“The experienced agent can argue that this case deserves a full agency commission because it saves the seller time and stress by avoiding what can be a lengthy marketing and sales process.”

Regardless of asset size (based on cumulative sales across businesses), he said commission rates seemed to increase from North Australia to South Australia.

“Queensland only entered a deregulated commission market in December 2014. Previously the rate was 5% maximum (first $18,000) and 2.5% thereafter,” he said. declared.

“In my previous corporate life, rates ranged from 2.2% in Queensland to around 2.8% in the south.”

He suggested that each supplier appoint an agent they like, trust and can work with, not someone who told them what they wanted to hear.

“The only difference between what most agents can do is the actual ‘opportunity’ – everyone has the same platforms, like marketing.”

Treat the real estate agency like any other professional service

Rawdon Briggs Necklaces

When selling, Rawdon-Briggs of Colliers Agribusiness said suppliers should treat agency fees like any other professional service fee.

“When I have a tax problem, I want the best accountant, because the net loss from bad advice is significantly greater than the fees charged,” he said.

“When I have a health problem, I want the best person to solve the problem – not the new amateur guy who is the cheapest. I want the best no matter what the cost situation is.

“When I have a legal issue, it’s about the outcome and how quickly a positive outcome needs to be achieved. Again, the cost is secondary. It’s about the quality and the time saved to arrive to the right outcome,” Mr. Briggs said.

Aurora J. William