22 Dec 2017

Why Do Real Estate Agents Charge So Much?

Housing affordability is always at the forefront of conversations around property, but what many people don’t talk about is how expensive it can be to sell your home.

 

It’s hard enough trying to make a decent dollar in our current economy; the last thing anyone can afford is to spend more than they should on selling their own home.

 

Today’s high property prices mean percentage-based sales commissions have become unrealistically high for the service that most agents perform. Charging fees of $10,000 - $20,000 to sell a home doesn’t align with the time and expertise required to do so.

 

Here’s why:

 

On the Sunshine Coast, the average property price is now a jaw-dropping $550,000. But that’s the reality of what we’re dealing with these days. Selling costs (marketing fees + commission) generally range from 2-3%. On the Sunshine Coast however, you’re looking at paying that much for commission alone.

 

I’m sure some of my fellow agents will come out swinging in defence of their very, very well-paid gig, but when you look at the hard facts, it’s just too much.

 

Now don’t get me wrong, agents work very hard and put in long hours – often 6 or 7 days a week in a high stress and very competitive environment. But the question is, ‘Is the financial compensation for that work simply out of touch with reality?’

 

To help us answer this, let’s look at the agent’s sales commission using an example of my own real estate transactions.

 

I’ve calculated this on the REIQ’s recommended commission rate of 5% on the first $18,000, and 2.5% of the balance – which was the calculation up until de-regulation in 2014 and then 2.75% after that. Many other local agents have increased their commissions to 3% and you can add 10% GST to these figures.

 

Commission on house in 1983

$36,000

$1350

4 weeks wages on the average of the time

 

Commission on house in 1992

$159,000

$4,425

Approx. 8 weeks wages on the average of the time

 

Commission on house in 2007

$345,000

$9,075

Approx. 8 weeks wages on the average of the time

Commission on the average SC house in 2017

@ $550,000

$13,612

Approx. 9.5 weeks wages on today’s average income

 

Can you see where I’m going with this? The average house sale takes about 20-30 hours of work for the agent and they get paid very handsomely on a percentage of the sale price. Evidently, house prices have escalated disproportionately to income growth, so in effect, real estate agent fees have become CPI proof.

So why not just charge a fixed fee which is a fair reflection of the amount of time, effort and expertise an agent needs to do a professional job?

 

While it’s fair to say that more effort is required in selling a $2,000,000 home compared to a $300,000 home to meet client expectations and service requirements, the principles around selling these two homes, however, are the same.

 

That’s why our model is different. We believe that because incomes and houses aren’t sliding on the same scale, it’s time to shake it up and separate the service from the house price.

 

So here is what we offer:

 

  • Full service from listing to settlement
  • Fully licensed professional agents with years of industry experience and proven results
  • Full professional marketing: photographer, floor plan, professional printing, digital and social media marketing
  • No risk/nothing upfront option

 

Our FIXED price success fee is $6000plus GST when our seller pays $1000 upfront to cover some of the marketing costs.

 

If you prefer to pay nothing up front, our no-risk option is a fixed price success fee of $8000plus GST

 

How can we afford to cap our fees? Simple – we don’t pay hefty franchise fees, huge office rent, staffing costs and payroll tax etc. It’s just us!

 

We believe it’s important to share our ‘why’ behind this model. Essentially, it’s rooted in a genuine belief that agents charge too much for the services they provide.

 

Our clients are the sellers and we are on their side; it’s our responsibility to provide the best financial outcome when they sell.

 

If we can help them save up to half the selling costs while still providing a quality professional service, then that’s a win-win situation.

 

____________________________________________________________________________________________________________________________________________________________


Sharing


Add your comment

comments powered by Disqus

What's your property worth?

Receive your complimentary market appraisal and find out what your property is worth to rent or sell.