Real Estate Agent Fees and Commissions – A guide

Real Estate Agent Fees , are they all the same ?

When a real estate agent is engaged to sell your property you agree to pay them a fee for doing this. When your property is sold and the settlement process is complete , they are usually paid a percentage of the sale price as a commission.

How much this fee or commission is can vary quite a bit depending on the agent and the competition for property listings in your area. Because real estate agent commission rates do vary, it is important to do your research and ask some hard questions prior to hiring an agent.

Some states used to have fixed fee and commission structures and others were deregulated. Now all states are deregulated which means real estate agents can charge what fees they think the market will stand. Surprisingly, when markets became deregulated, commission rates have increased rather that decreased. Other factors that may impact how much commission you pay include your local market sales and turnover and the apparent historical success of the agent involved. Higher selling real estate agents often try and increase the fee percentage they charge .

Real Estate Agents Commissions , how much do they charge ?

In most instances, residential real estate commissions are calculated as a percentage of the final sale price of the property. For example, a 2.5% commission, on a $600,000 property = $15,000. It is important to remember that you will also be required to pay GST on the total of any real estate commission as it is not gst exempt. There are a few flat fees sales agents out there but not very many nowadays. The vast majority are an agreed percentage of the sale price.

Real Estate Commission rates , what are they currently :

In 2014, when all states throughout the country were deregulated, this allowed real estate agents to set their own fee. Many real estate agents base this fee off the demand for real estate in your area, their experience and what the value of your house is. For example, in country areas where home prices are generally lower , many real estate agents fees have gone up to 5 % or more. The idea is that the total commission earned on a lower value property requires greater compensation to the agent. The average percentage commission appears to now be around 3 % including gst. The range is quite wide now at 2-5 % . How good you are at negotiating the commission with the sales agent will determine what you pay.

Real Estate Fees , how you can reduce them :

Real Estate Fees , how you can reduce them :Many home owners, both novice and experienced, do not realize that although agents do have their set percentage fees , it is fine to try and negotiate with them, to save yourself some money. If you have a property in a very desirable area , it is well presented and you are realistic with your selling price than this is a very easy sale for most real estate agents. The real estate fees charged in this scenario could be negotiated lower , perhaps quite a bit lower as this sort of property listing is highly valued by agents and if you stand your ground then the real estate fees may drop by 1 or more percent. You should make sure you know the value of your home and present it very well before the agent arrives and the fees are negotiated. Being well prepared and knowledgeable about home sales in your area is very important and will give you the upper hand.

Does the percentage of Real Estate Agents Fees paid mean you get better service ?

When it comes to negotiating commission rates there is some debate ( depending upon which side of the transaction you are coming from ) that you should be aware of. Some believe that higher fees or commissions work as an incentive for your sales agent to get you the most money for your property. This is a very subjective discussion as many in the community believe commission rates are quite high and for the type of well present property mentioned above, a lower fee for a faster simpler sale is appropriate. Like any negotiation , you need to have a good proposition to offer to get the deal you want. Often, when negotiating a lower commission rate, the conversation brings up two options a tiered percentage, and a fixed rate.

A tiered percentage is a way of adjusting the commission that your real estate agent receives based on what the house actually sells for. For example, you might strike a deal for 2% commission if your property sells for $500,000 or lower, and then an additional percentage for any additional increase in sale value. So, if you home were to sell for 540,000, you would pay $10,000 commission for the initial $500,000 (500,000 x 2%), as well as an additional 10% on the additional $40,000 of the $540,000 sale. $4,000 dollars. This is starting to gain some traction as a way for both parties to benefit from the incentive of a higher sale price.

A fixed rate means that you and your real estate agent agree upon a set dollar amount regardless of what the house ends up selling for. This form of payment has both benefits and drawbacks, the benefit being that you know exactly what you will be paying, regardless of if your home sells for more; however, the drawback is that the house can sometimes sell for a lower price or take longer. To be honest , a lot comes down to the character and commitment of the sales agent. Good real estate agents will try for the best price for you regardless as you will recommend them to others if they do a good job.

Real Estate Fees for selling , you can have a say :

When it comes to understanding real estate commission rates it is important that you do your research. While each state has different average rates, the actual commission rate charged is up to you and the real estate agent. Real estate agents understand that your home is probably your biggest investment. Many agents are willing to discuss their commission rates, however, you need to be realistic when going in to negotiations.

Be aware that while options like a tiered percentage, or a fixed rate are great depending on the situation, but that they are not for everyone. Run your numbers, as to what you would like your home to sell for, and what the agents are asking for. While doing this however, it is important to be aware of the fact that your house may or may not sell for what you are asking.

There are a lot of options out there when you are looking for the right real estate agent, and finding one that is able to work with you on their commission rates is a huge factor. Take your time to do your research, it might take a bit longer, but it will make the overall process less stressful, and (hopefully) easier on your wallet.



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