Vested Interests in the Real Estate Industry

The real estate industry in IS heavily regulated despite what some may say. We must adhere to a strict code of conduct and  take in thousands and thousands of pages of legislation to ensure we meet all requirements in our everyday jobs. We are actually bound by legislation to act in the best interests of the seller at all times – with huge penalties for not adhering to this.

There are 'cowboys' out there – but I'd argue that is just like any other industry. The problem with real estate is that it so heavily impacts on people's lives when they have a bad experience or have been lied to by an agent.

Within the industry there is currently a huge push by a majority of agents to clean up the public view of the industry by being more transparent. I for one am on the bandwagon big time – because I was brought up to be honest with people no matter the consequences (i.e. possibly losing a listing to an agent who quoted an unrealistic, higher figure) and I've found I get a positive response.

I could blab on about how the article is using international examples for local industry performance but it's an opinion piece… Everyone is entitled to an opinion.

I agree with you KeyStrategies, it is about people recognising the role of an agent.

If you want sound financial advice – go to a financial planner and also refer to your accountant.
If you want a real estate agent to find you the best deal as a buyer no matter which agency the listing is with – get a buyer's advocate.
If you want advice on selling and market trends – go to a real estate agent with a good reputation…. and ask the right questions, see this post for examples https://www.propertyinvesting.com/forums/property-investing/general-property/4344370

Marketing and selling properties OTP is extremely time consuming and difficult in today's market, often involving setting up an on-site sales office that is not paid for by the developers. In this case I believe high commissions are necessary as the selling agent needs to recover the costs of set up. If however a financial planner or investment group (not a licensed real estate agent) is paid these kinds of commissions then I agree it may be far too much.

But we don't get the whole picture here… how much are the properties? Where are they located? Are the developers desperate to sell the last percentage to gain finance? Any of these factors could justify large commissions to anyone who finds a buyer and refers to their sales department. Tip – never buy a property though a group that is not licensed!

I can only comment on commissions charged in Victoria as I am not fully aware of interstate fee structures (i.e. who pays advertising etc.). Our charges are 2.2% including GST (which is fairly standard for metro areas) with vendor paid advertising. Any negotiation from there depends on the property's value and whether they have been a long term client etc. but at the end of the day the time and effort in selling a property in such a tough market shouldn't be underestimated.

Why I don't charge 1.1% and no one should: because it's not worth my time and I have a policy of exceptional service – you can't offer exceptional service for discount rates, it's just bad business practice. A lot of agents are discounting at the moment, but they work on volume – sell asap for whatever price is closest to the vendor's aim.

Regional and outer Melbourne agencies charge more for a few reasons – distance between the property and their office, average days on market for properties are higher and less buyers in the market makes for harder work. We sold our house in a rural area a few years ago and paid 3.9% plus advertising of $2000 on a $450,000 property. Houses in the area were averaging 120 days on the market at the time and most agencies were charging 2.5%… But I had a deal with the agent that if it didn't sell within 120 days they would pay advertising. The agent had it signed sealed and delivered within 3 weeks. Did we pay too much? Maybe. Did we get exactly what we wanted? Yes.

When selling, it really is quite simple… The market is rough at the moment so whilst paying more commission may seem undesirable, keep in mind – you are not the only client the agent has, so if you're paying minimal commission expect minimal results from most agents. Sad but true.