Have you ever wondered why Real Estate Agents charge so much commission? And why should you sell with an Agent, rather than trying to sell your house privately? Let me give you some inside information...
First of all - Real Estate Agents have costs, just like any other profession. There’s a fee to do the courses required to become a Real Estate Agent and keep your skills up to date, there are licence fees to keep registrations current, we need to pay insurance, lease fees for the office, bills like electricity, phones, car costs (we are always in our cars, so we use a LOT of petrol), we have to pay for settlement gifts when a property sells, and marketing (ie. flyers drops and Facebook ads) to get our name out there, and the list goes on. So, in reality, it’s just like any other business, in that respect. Also, if a Real Estate Agent is working for someone else's company (ie. if the Agent has a boss to report back to), we also need to give some of our commission to the principal of the office as well. So we definitely don't get to keep all of it ourselves.
According to Payscale the average Real Estate Agent in Brisbane earns just over $52,000 per year, which is roughly about $25 a hour. But remember - I did say average. Some of the better Agents in the area are probably earning anywhere from $80,000 upwards a year, depending on how many houses they can list and sell. But to be achieving that sort of money, they would probably have spent $1,000's of dollars on training to better themselves in the long run.
Why should you sell through a Real Estate Agent instead of privately?
I'm glad you asked. Once a Real Estate Agent does the course to become certified, they learn special skills such as marketing, copywriting, styling, selling, negotiating, and how to price homes in the current market. They also have knowledge on local council restrictions (what can and can’t be done with the block of land/home renovations). They acquire communication skills that enable the Agent to know what the buyer is thinking when they put an offer in, and if they can offer a higher purchase price. They have skills to create competition in the market to drive prices higher than the asking price and they also have a database of buyers waiting to purchase properties, so as soon as you list your property, you have interest straight away, making the selling time shorter.
So, when you pay for commission, you’re not just paying for the Agent to sell your house, what you’re actually paying for is an Agent’s skills, their database, professional contacts within the industry, knowledge of the current housing market and how to price your home within it. You’re paying for someone who knows how to negotiate and get the best possible price in the shortest amount of time. So why wouldn't you use one when selling the largest asset that you will probably own in your lifetime?
What if I hire a cheap Agent? – I hear you ask yourself. Are cheap Agents worth it? It may be tempting to sign up with the Agent who charges the cheapest commission, however you’ll usually be better off going with the BEST Agent rather than the cheapest, and here’s the reason why - A cheap Agent won’t get the best price for your property, but the best Agent will. That’s why they’re the best. Even if the best Agent charges more in commission, you will usually have more in your pocket after paying their commission because they will get you the most money for your property.
Here’s an example:
A cheap Agent will sell your home for $600,000 and charge you $10,000 in commission, leaving you with $590,000 in your pocket. The best Agent will sell your home for $650,000 and charge you $20,000 in commission, leaving you with $630,000 in your pocket.
See how it works?
Even if you sell your property privately yourself and end up getting $620,000 as a final sales price (with no commission), you would still be $10,000 better off hiring the best Agent, even after paying their commission.
And it’s the same with marketing costs. A cheap Agent will hook you in with cheap marketing costs to get you to sign up with them, even though everyone knows that the more exposure your listing attracts, the more people will see it. ie:
A cheap Agent will charge you around the $1,000 mark for upfront marketing to get the result above. The best Agent will charge you around the $3,000 mark for upfront marketing to get his result above.
So, when you take off the $1,000 for marketing from the cheap Agent, you will only have $589,000 in your pocket, compared to the $627,000 that you would have from the best Agent, after subtracting the marketing fees. That’s an extra $38,000 in your pocket when choosing the best Agent over the cheapest Agent.
And why will the best Agent get you extra money in your pocket when a cheap Agent won’t? Because the best Agent has proven experience dealing with buyers. He’s better at negotiating than the cheaper Agent. He knows how to market a property properly to get the most number of buyers through as possible. He’s not cutting corners like the cheap Agent is. He’s doing absolutely everything in his power to get you the best price for your property. And why is he doing this? Because he wants to keep his reputation as being the best Agent in the suburb.
Ok, so a cheap Agent definitely isn’t the way to go. But you’re confident that you can sell your property privately yourself, without a cheap Agent and without the best Agent?
15 QUESTIONS TO ASK YOURSELF BEFORE SELLING YOUR HOME PRIVATELY:
If you're still thinking of selling privately to save on commission, ask yourself the questions below first:
If you think you have all the above under control and can handle any unexpected situations that pop up during a listing, then by all means, have a go at selling privately and saving the commission that you would normally pay an Agent. Just remember that you probably won’t get as much as the best Agent will get for your property, and that you will end up with less in your pocket than the best Agent in the suburb would get for you, even after they’ve taken their commission out. So why not let someone else do all the hard work for you and reduce your stress load, while achieving a higher sale price because you’ve hired an expert? That’s what we’re here for after all.