I am selling my house and before I start to talk to a Real Estate Agent, about his/her commission, is there any tips/word of advise on how to negotiate this. What is the general commission rate expected to pay?
Thanks & regards
Bruce
Perth WAHi Bruce,
Thanks for your post and welcome to the PropertyInvesting.com community.
Some comments that I’d make are:
1. Understand the market. Before getting down to business make sure you ring around several r/e firms to gauge what the high and low range is for commissions.
2. Consider the true cost. All agents I know also charge on-costs in addition to commission, either in the form of a marketing levy (for Jenman agents) or specific marketing / advertsing costs (for other agents). Be sure you know what you’re in for b4 you sign.
3. Exclusive listing agreements. You will be asked to sign an exclusive listing agreement that gives the agent sole responsibility for selling the property. I wouldn’t lock in for more than 45 days.
4. Price or service? Personally, I’m happy to pay more for service rather than going for the cheapest option. So what I’d be careful to observe and certainly find out information on is how the various agents plan to market your property. In other words… you want to know who is going set the best strategy to get you the best price.
5. Always Negotiate Everything is negotiable… and while you negotiate observe how your agent reacts / haggles since this is the way that they will act with potential buyers.
I hope this has helped Bruce… pls get back and tell me how you went.
Cheers
Steve McKnight
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Dear Bruce,
I presume that the rules on agents commisions in WA are similar to those in Melbourne where I am….
Suggestion number one is to ring a few agents and ask. Don’t tell them your address or surname, but ring and ask. In Melbourne the initial offer by the agents is anywhere between 1.5 % and 4 % of sale price, plus advertising costs.
As Steve has suggested in his point # 5, negotiate. If the agent asks for 4 % of final sale price, offer him/her 1.6 %. If he asks for 2.4 %, offer him/her 1.2 %, etc.
Alternatively, make something up to suit you first, then the agent second.
I use a “sliding scale” that has been very successful for me. I offer the agent this kind of scenario :
0 % ( nothing ) up to $X, then 10% of everything between $X and the final sale price. The $X figure is negotiable.Or you could offer 5% of the difference between $Y and the final sale price, including advertising costs. Or make something else up yourself !!
If you do your sums, and you know that the agent will always tell you that he can get $428 trillion for your house which you know is worth about $200 thousand ( or whatever ), you can use these or similar sliding scales to your advantage.
RE Agents are great at selling houses, but most of them are really bad at simple mathematics. Use this fact, but do your sums BEFORE you even talk to an agent. Keep in the back of your mind that an agent is not going to agree with your offer unless he can see that it is potentially atractive to him. The “sliding scale” concept means that if the agent actually does sell your place for $428 trillion, then he stands to get more than his original offer of 4% of final sale price with your “sliding scale in place”. But this should not worry you, because he has got an obscenely high price for you ! And everybody wins ! If your place finally sells for $200 thousand as you correctly thought it would to begin with, then the agents commission is very, very low. And you win !
Don’t set out to rip the agent off, and definately give him/her an incentive to get a good price for you. But do cover yourself, “just in case” the sale price is not as high as the agent originally suggested it would be….I used a similar scale like those above when I sold a house a year or so ago. I was very happy with the final sale price. The end result was that I paid $1400 in commission. Had I used the agents offer of 4% of final sale price, I would have had to have paid $4800 in commission.
I hope this helps.
BDM
Melbourne,
AustraliaHi all
I finally got three r/e reps who I believe are leaders in their field for the area I live and are locals. Two are principals and one is an employee.
The first principal knew of what value we were looking for (my wife told him – first mistake I believe). His presentation was excellent and gave us a marketing strategy to sell – large front yard sign with photos, internet and paper adverts. He will open the house regularly himself (not his staff). He was prepared to give this for a $350 advert sharing cost plus his commission of 3% of sale price(incl GST). He gave us very little suggestions to improve the house look apart from the normal (ie clean front yard and remove excess junk).
The second principal appeared to be thorough in listing all the features of the house in detail. I saw him that evening after he had done the inspection and had time to work out the valuation. His valuation was lower than the first principal (my wife didn’t give him any details this time). The marketing strategy was much the same as the first but with less advert on the front yard sign (to make more prospects ring him). The commission was negotiated down to 2.6% from 3% ($1500 savings)
The third agent also had the opportunity to inspect the house prior to coming back that evening to give her report. Her marketing stategy was slightly different, she does fewer home opens and more private one on one showings. Her valuation was over 10% less than the second principal and commission was 3% plus GST. The bad point of her was that she started talking to us the negative aspects of the house. We thought what is she going to say to prospective buyers?
In summary, commission could have been negotiated harder if we knew or had more confidence. I don’t like selling, I am a buy & hold investor. We didn’t go for the first agent as he knew what we wanted and did not knock our valuation, we believe he could do that later after th4 weeks have gone by. We don’t want four weeks!
It is obvious we didn’t go for the lady even though she would be the biggest r/e rep seller of the suburb and her boss’s business in Perth (it is not small).
The second principal should he had the confidence to sell at the price he stated and was flexible in a number of issues. We just felt comfortable in doing business with him.
Be wary of agents wanting to have a key on site for all other agents to come in. We felt there was no control here even if it is secured like Fort Knox.
Hope this information is useful for others. I will keep you informed of the sale process.
Bruce
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