Real estate commission and fees explained

When it comes to selling a property, you generally have two options: you can sell it yourself, or engage a professional to help. There are many reasons you may choose to sell through a real estate agent – they can provide ease and convenience, not to mention the possibility that they may be able to negotiate a higher price than you yourself could. If you choose to sell through a real estate agent, though, then you can expect to pay for their services, often in the form of real estate commission fees.

Different real estate agents structure their commissions in different ways, and real estate commissions can vary quite widely across Australia, so there is no one-size-fits-all approach to how they work. When you’re planning to sell your property, it could pay to speak with a number of agents and weigh up your options. This will allow you to determine not only what commission structure works best, but also who you believe will achieve the best result. Here are some important things to know.

How much do real estate commission fees cost?

The average real estate commission in Australia can vary a fair bit, depending on the state or territory in which you live. The table below shows state-wide average agent commissions. In South Australia for example, you could pay real estate commission averaging 1.99%, or you could pay as much as 2.96% if you’re selling a home in Tasmania.

Bear in mind these figures are not set in stone – commissions vary even within the same state. As a guide, the average commission based on rates charged by agents who used OpenAgent, a real estate agent directory, in Queensland, may vary from 2.73% in Toowoomba, through to 2.78% in Brisbane or 2.86% in Townsville.

Average real estate commission and marketing costs

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Source: OpenAgent.com.au (29/05/24)

How do real estate commission fees work in Australia?

The commission or percentage fee charged by real estate agents is often based on the selling price, but there can also be a number of fixed-fee options. It’s worth noting that an agent usually also helps with advertising, photography and copywriting to market your property; but these services may be charged on top of the commission.

Across Australia, real estate commissions based on a percentage of the selling price typically range from around 1.0% to 3.6% of the price your property sells for. However, this range is a general guide only as commissions can vary tremendously depending on factors such as the location and value of the property, so it can be hard to pin down the average real estate commission.

The different types of fee structures include:

Flat fee real estate commission

Some agents may offer a fixed flat fee commission. A benefit of this is that you know upfront exactly how much you will be paying, and it could work out to be cheaper than paying a fixed percentage commission. The downside is that it can be hard to find an agent that charges one.

This fixed flat fee could be in the form of a capped commission, where you pay up to a certain amount; or a fee no matter the sale price, which may or may not include other costs such as marketing. It’s important to note that it’s likely that a fixed flat fee will be in the thousands of dollars. It could be a wise idea to make sure you understand what the terms are, and what happens if the property fails to sell.

Fixed percentage fee commission

One of the most basic ways commission is charged is using a fixed-percentage fee structure. This is typically charged as a percentage of the final sale price of the property. When you receive an estimate from a real estate agent, they will generally let you know the approximate amount they believe your property could sell for, along with the percentage they’ll charge in commission (which may or may not include their advertising services).

The benefit of agents charging a commission as a percentage of the sale price is that it can act as an incentive for them to fetch the highest price possible for the property. The incentive may not be as high compared to agents working with a tiered/sliding structure, but a fixed-percentage fee could work out cheaper if you’re selling a more expensive property.

Tiered/sliding scale real estate commission

Another common structure for real estate commission is a sliding scale or tier. This commission is based on a percentage of the total sale price, with it increasing as the total sale price increases. For example, an agent might charge 2% on properties up to $500,000, 2.5% on properties between $500,000 and $1,000,000, and 3% on properties over $1,000,000.

Another version of this model could be an agent charging a percentage up to a price point, with an additional percentage charged for any dollar over that amount. For example, they may take 2.5% for any sale up to $500,000 and 5% of every dollar over $500,000. Again, additional fees for services such as advertising may or may not be charged on top of this.

Tiered commission rates work like a bonus system for real estate agents. In general, it can incentivise them to work harder to sell your property at a higher price. You might end up paying more with this structure, especially if your property sells for a high price, though the benefit is the potential to secure a better sale price. This could outweigh the increased commission.

Why do real estate commissions vary?

According to OpenAgent.com.au, the the different types of fee structures for real estate commissions are based on:

• the area
• the value of your home
• the current state of the property market

In our state capitals for instance, home owners can usually select from a wide number of real estate agents, all competing for your business. This helps to keep commissions down. In rural or regional areas there may be far fewer agents to choose from, and this can give agents scope to charge a higher commission to sell your property.

What other fees do you pay when selling property?

There are usually additional expenses involved in selling a property on top of the commission, including marketing costs. As the table above shows, marketing costs can be as low as a few hundred dollars, or they can add up to $10,000 – potentially more.

It’s important to understand exactly what the real estate commission will cover. Some agents may have mandatory marketing fees, or involve you in the development of their marketing plan; giving you a potential say in how much it will cost. Some advertising costs could include:

• a ‘for sale’ sign
• online/print real estate listings
• social media marketing
• physical marketing material
• floor plan diagrams
• photography and videography
• staging furniture or props

Other related fees that you might want to consider include home loan discharge fees, conveyancing fees and GST. A discharge fee is charged by lenders for terminating a mortgage, such as when you sell your house and repay the remainder of the loan. This varies depending on the lender, but is typically around $335.

If you’re choosing the auction route, an auctioneer will typically cost between $400 to $1,000, although in some cases their fee may be included as part of the commission you pay your real estate agent. Conveyancing or legal fees will typically cost you another $500 to $2,200, depending on the state or territory you live in and the service provider.

It is a good idea to confirm whether GST is included when you’re given quotes from the real estate agent, auctioneer, conveyancer or solicitor. Also keep in mind that even if your home doesn’t sell, you might still need to pay for marketing and other fees.

Can I negotiate real estate commissions?

Real estate commissions are often negotiable, but you can only negotiate before the sale. In fact, it’s a relatively common practice for sellers to negotiate commissions down. This makes it a good idea to ask a number of agents what their costs are.

Most of the other fees (including advertising fees) you’re quoted are also often negotiable. When you have settled on the fees and costs, make sure that you get everything in writing. This could provide some protection and help ensure you have a clear understanding of what you can expect to pay.

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