I am attempting to sell my first IP to take advantage of the buoyant Perth property market. My agent is the best (most successful) in the area and quoted this high rate of commission (which includes advertising) when I met him initially. I was happy to enlist his services as he made it quite clear that this was to be a negotiable figure, negotiated upon the sale of the house. The final commission would be dependent on:
– the quality of service he provided,
– the length of time it took him to sell the house (wrt advertising costs and his workload)
– his success in negotiating the best possible price.This is all very reasonable. As it happens, he has provided an exemplary service so far. I could not fault him on a single point, in fact.
The house has been on the market for a couple of months however, the asking price has been reduced twice (a total of 5%) and all informal offers so far have been considerably less than the recent selling prices of similar properties. The house is a first homebuyer type of property and that market is particularly competitive (for sellers) right now.
The dilemma: When the property invariably sells for a lot less than I had envisaged (only two months ago – based on market data), am I to pay top dollar for ‘a good service provided’ and a very disappointing sale price (which is a result of a cooler market only) or am I justified in negotiating a lower commission?
I am a believer in fairness and an honest dollar for an honest days work. I am not keen on paying top dollar for a ‘bottom dollar’ sale price however.
I can’t get my head around this one. What do others think?
Hey gecko,
i can see yr dilemna and that yr a man of integrity and fairness.I see what yr saying but i would have thought that the commission would have to be agreed upon before the contract of listing with the agent was signed.Otherwise you have nothing to really fall back on.
Unless of course the agent is a real yhonest guy aswell and can see yr point. The problem is we all see things differently and from different sides.he may think he has got you the best price possible for the current market, and their may be nothing you can do if the 3.4%commission you talk about is on the contract.
I would probably talk to the agent now and discuss yr thoughts.I am sure he will understand.“Don’t let yr character be impacted by yr surroundings, instead make yr character impact yr surroundings”
– Rachel Scott(17 yr old killed in columbine shooting 1999)http://rachelschallenge.com/Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
If you signed a sales contract with the agent it probably stipulates the commission and you will not be able to do anything about it.
A more productive way of working out commission is to have a two tier on the commission.
eg if real estate rep quotes say $400,000 as the price you pay a commission of 2% on price below or at $3600,000
Then you put in the contract that for every dollar above $360,000 you pay a commission of 16%.
This gives the agent a reason to get as high a price as possible for you.
If you work out the figures if he achieves $400,000 he gets 3.4% if he achieves a higher price he achieves a higher commission.You should read a copy of the book don’t sign anything by Neil Jenman or real estate mistakes by Neil Jenman.
see
http://jenman.com.au/Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Just be careful of the sliding scale of commission,it can tempt shonky practices just to get a higher price for the house for the agent to get a higher commission.(regardless of what the propertys actually worth.)
“Don’t let yr character be impacted by yr surroundings, instead make yr character impact yr surroundings”
– Rachel Scott(17 yr old killed in columbine shooting 1999)http://rachelschallenge.com/Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
First of all; why sell to realise the profit and lose a whack of it in cgt? I don’t think you need to do this unless you need the cash to live. Why not keep it and maybe re-invest some of the equity? You choice of course.
Sorry to say this but it sounds like you are a victim of ‘conditioning’.
The agents tell you a lovely high sale figure to get the listing, back it up with big promises of great advertising and ‘buyers waiting’ to justify the commission and ad campaign.
Then over a period of weeks they tell you ‘the market is telling us’ your house is worth less so they can get you to drop your price down (to what it is really worth in the first place). You end up selling the property at the true market value (or lower) and pay out a grand or more in advertising to the agent, who gets an enormous discount from the newspapers for his business. They have a double win and you lose.Arrange a meeting with this agent and tell him/her how disappointed in the results you are and ask for a re-negotiation of the commission – no more than 2%, or put a dollar figure on it, say $5,000 regardless of the sale price(the agents hate this) but in reality they don’t care what it sells for as long as they get a commission.
Failing a re-neg of the commission, you need to get rid of this agent and start again with some knowledge behind you –
1. Write a letter to the agent saying his services are terminated as of now – most contracts will allow you to do this – hand deliver it. If you can’t sack him, then simply refuse all offers to sell unless they are above your minimum and wait until the sale authority expires. The only problem is you may be liable to pay any ad costs incurred by the agency so far. ouch!
2. Get the house valued so you know what it is really worth, or start researching the area yourself to nail down what your house is really worth.
3. Sign another agreement with another agent, pay no more than 2% commission, and make the sales authority period no more than 45 or 60 days with no advertising (agents hate this, but they are not worth a cent more). The reality is that serious buyers are already out there and will be either looking on the internet, trawling the streets looking for “for sale’ signs, and looking in all the agent’s windows for properties. You do not need to spend a single cent on advertising; it’s a total con – the photo on the internet, the sign in the front yard and the picture in the front window at the agency are all free and all you need. Maybe a few fliers for the buyers to take away from the agent’s office at a small cost will be enough. The rest is just a money generating process for the agency.
4. Look at the Neil Jenman website for his book on real estate mistakes and how to protect yourself from agents and their games.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hey Marc,
That’s some sound, hardball advice for a difficult situation. I’m going to bookmark this thread just for that bit of info. Hopefully I won’t need to act on the info but it’s good to have in the knowledge bank.
Cheers,
Art‘Great spirits have always encountered violent opposition from mediocre minds.’ – Albert Einstein
I didn’t think it was hardball myself – maybe I’m too hard on the agents? (I’d doubt it).
I thought this was just standard procedure! Oh well – it’s their chosen profession.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Thankyou for the insightful advice from everyone.
I have come to the conclusion that, at the end of the day, I am not comfortable with the idea of paying someone the price of a new Hyundai to sell a house. It is hard to justify, especially in a softer market.
Also, I have resigned myself to the fact that I will achieve a lower price than I had hoped for due to the nature of the present market. I believe that the house was overpriced initially but not by a significant amount (less than 5%). But the market is not as strong now as it was then. The agent suggested a potential selling range before the house was put on the market and I (perhaps greedily) agreed to market the property at the high end of that range. So I can’t fault the agent for overpricing to get my listing, as he already had that.
My contract with the agent is one of the ‘No Sale, No Fee’ type, but he has four months in which to obtain a sale. This, I would do differently in the future – ie. negotiate a three month contract. I had wrongly assumed that the house would sell quickly (after all the months of renovations I had personally carried out!) and that this would not be a relevant issue anyway.
Duckster – I can see what you are saying regarding incentives for the agent to achieve a higher sale price. The thing is, I genuinely believe that he is doing, and will continue to do, everything he can to achieve the highest sale price possible. As I said, his level of service has been first class. Ultimately though, it will be the (buyer’s) market which will determine the price that will be achieved, more than anything else.
LA Aussie – Yep, that is some hardball advice there, that’s for sure. Good advice, no doubt. Once again though, I am reluctant to take on a new agent considering that he has done a good job so far, and in fact I don’t have that option for another couple of months anyway (four month contract). Also, judging by the number of informal offers made, I will be very close to market value after another $10k price reduction. But in the future, my approach will be closer to what you suggest. I am becoming a believer in the idea that agents don’t sell houses – houses sell houses.
World Changer – Yes, I believe that the agent is a man of his word and that some negotiation will be possible, but any negotiability may be limited by your one sentence – the fact that he may have achieved “the best price possible for the current market”.
I will see how it goes!
Gecko72,
I would still read Neil Jenmans book ‘Dont Sign Anything’ before you renegotiate with the agent. You will not think LA Aussie’s advice is hardball after you read the book. In fact if you read the book you will find yourself saying “he did that to me” and “so that’s what he is doing!”.
I witnessed a lot of the tactics RE agents use when my brother sold his reno’d house, and there is little ‘fair’ in an agents days work.Hi, Gecko
I agree with a number of the replies. Definitely ready up on Neil Jenman’s book. It tells of many tricks that RE agents use to get their listing and commission.
If the agent was really good (and honest) and in touch with the market, he would have told you the realistic worth of your property and chances of selling in the current Perth market.
All the best.
Regards
Daniel [specs]I have meet Neil in the flesh at one of his information nights and it is a real eye opener to see what some real estate agents get up to.
The market is bad at the moment due to the increasing interest rate trendComments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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