Working with a real estate agent is the most common way to sell a property, and it's not hard to see why. They have the resources and experience to get your property sold for the best price possible - but as with all good services, it comes with a fee and what’s known as a real estate agent commission. 

Every real estate agent will have their own breakdown of service fees and commission, and as a property investor, it’s important to understand how these are structured before working with an agent. Not only should you feel confident that your agent is charging you fairly, but that you’re also getting the best bang for your buck. 

A real estate commission is the money that your agent charges as a fee for selling your property on your behalf.

A commission is essentially payment for the services your real estate agent provides to sell your property to the best buyer for the best price. These services usually cover communication with buyers, managing and negotiating offers, running open homes and increasing interest in your property through marketing and advertising.

The commission is usually valued at a pre-agreed percentage of the total sale price of your property, and this sum is paid to your agent once the sale is finalized. 

In Australia, the average real estate commission is usually around 2-3% of the property's total sale price. This means that if your property sold for $700,000 then you would expect to pay your real estate agent around $14,000 to $21,000 in commission. 

 
However, this figure will vary depending on a couple of factors: 

• Your location: The average real estate commission in Australia varies between states, regions, and suburbs!
  
  
• Property value: Real estate agents will sometimes offer lower commission fees for properties with a high value.
  
  
• Market competition: If multiple agents are competing for business in your area then they may lower their commission fees to attract more sellers.
  
  
• Agent experience: A highly experienced agent may take less time to sell your home and therefore offer a lower commission. 

While real estate agent commissions aren’t regulated in Australia and your real estate agent can set whatever rate they want, the market lends itself to the role of regulator - and does a pretty good job of it too!

Real estate agents who set their prices above the average 2-3% commission rate run the risk of losing customers, and business.

This is a tricky question because the average real estate agent commission varies across Australia, and as we just mentioned, isn’t regulated. While this can be bad news for property owners in high commission areas, this can be good news if you’re an overseas investor buying property in Australia.

The table below should help give you a better idea of your location’s average real estate commission. 

In Australia, there are two key types of commission structures used by real estate agents: fixed commission and tiered commission.

A fixed commission structure is when the real estate agent is paid a pre-negotiated percentage of the property’s sale price. You would notice most real estate agents use this structure to calculate their commission amount.

Under a fixed commission structure, a property that sells for $800,000 with 2% real estate agent commission rate, will see the real estate agent make a total of $16,000 from the property sale. 

A tiered real estate commission structure is based on performance, and this involves you and your real estate agent agreeing on two separate commission amounts.

The higher commission will be paid if the real estate agent sells your home for above the target price and the lower commission will be paid if they don’t. 

A tired real estate commission structure isn’t as common as a fixed structure but some real estate agents use the extra motivation to do what it takes to make a great sale. 

On top of the real estate agent commission, you will also be required to pay additional real estate agent fees. 

Real estate agent fees will generally cover all of the marketing and advertising efforts taken by your real estate agent. This means that you would need to pay additional fees for services like online advertising, letterbox drops, professional photography and copywriting. 

While you can get some idea of the approximate costs of these agent fees in the table below, every agent will charge a different price. It’s not uncommon for some agents to charge a flat rate, while others charge a percentage rate based on the value of your property. 

You will also need to factor in GST fees and additional auctioneer fees if you choose to sell your property via auction.

You might not be able to get out of paying real estate agent commissions or fees entirely, but that doesn’t mean that you can’t negotiate their price. 

Both real estate agent commissions and fees can be negotiated by sellers and investors before the contract is signed. Negotiating the fee reduces your likelihood of paying an inflated commission and fee costs while giving you more control over your budget and helping you get more from your real estate agent. 

When it comes to negotiating real estate agent commissions and fees, it pays to do your research. Make sure that you talk to a few different agents about their flexibility around commission and fee costs before choosing one to sell your property. 

You can also use the following strategies to get the right price: 

• Let real estate agents know that you’re comparing costs 
• Consider asking for a tiered commission structure 
• Get all real estate fees and commission costs in writing 
• Don’t forget to haggle down additional marketing fees 
• If you own a luxury or high income making property then remember to ask the agent to reduce the commission 

While real estate agent commission and fees are unavoidable costs when selling a property, understanding how they are calculated can lower your overall expenses. Of course, finding the right real estate agent is more than just about finding the cheapest and it’s always best to go with one who you believe can sell your property well. But being able to negotiate and discuss your costs doesn’t hurt either. 

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