Real Estate Commissions — How Much Should Real Estate Agents Charge?

14 Jun 2017
Estate Agents Co-operative
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Real Estate Coach On Demand Lisa B is a veteran of substantial real estate listing and marketing campaigns. Aware of the costs associated with running a real estate office, and the desire of most vendors to get the best service for the best price, Lisa is well-credentialed to discuss such a contentious topic:  

Issues with real estate commissions

When I started in real estate in NSW over twenty years ago, our fees were regulated. You could not charge more than the fee that was set. Some agents went below the regulated fee, however those offices didn’t normally last long.

When fees were deregulated, agents were able to choose a fee that they were happy with.  Some kept a similar rate to pre-deregulation and others put their fees up.

These days, how much a real estate agent charges is totally up to the agent and their office. However, let’s get one thing clear… times have changed. Whether you like it or not, things have changed drastically in the real estate world!

Therefore, I would now like to put my thoughts down as to why I believe many agents don’t like to see agents drop their fees below, what was, the old base rate.

Different days, different ways

Back in my day, it was a level playing field… you won the listing based on skill.  We all had the same business model: we advertised in the newspapers, we erected For Sale signs, we did open houses and we delivered letterbox drops.  We didn’t have websites – after all, there was no internet.

These days, there are different business models that offer much cheaper ways to run a real estate office. Overheads can be minimal, compared to the old business models that some agents still used today.

This is what we need to get our minds around now.  If an agent’s overheads are low, they can still make money charging lower fees.

How much should agents charge?  

If you are a single operator working from home, then your overheads are low and you don’t have large costs like staff, commercial insurances, etc.  How much do you want to earn? That’s up to you.

If you are a medium-to-large office with high overheads, then what is your breakeven point?  How many sales do you need to ‘even the ledger’ at your current fee?  How much profit do you want to make? For the record, I am still a firm believer in charging a fair fee.

What I mean by a fair fee — a fee that is commensurate with the person’s skills and ability. If I work bloody hard, I want to be rewarded well.  If I train hard and learn my craft, I deserve to be financially rewarded.  If I know I can do a better job than the agent up the road, I expect to be paid more.

Facts about how agents work:

  • Some agents are worth a much higher fee
  • Some put their heart and soul into their career and some don’t
  • Some agents work really hard and want to take on the world
  • Some just want to earn a living
  • Some agents can demonstrate their value and their worth
  • Some can’t, and
  • Some agents are great at negotiating and some aren’t.

And yes… It’s the same with anything, not all real estate agents are going to be good. The reality being, a cheap agent can cost sellers money. The client got what they paid for… so to speak.

In summary

With the introduction of new technology, the abundance of industry-training organisations, changing government legislation/licence updates, instant/broader communication devices – and the times each agent allocates to mastering each area — you really can’t compare every agent the same way anymore.  Every business model is different.  Every situation is different.

I believe at the end of the day, when agents take their turn to sit down with the owner and pitch for the business, the agent that shows the seller their full value and worth will win the business… whatever the fee.

Do you have an alternative viewpoint? What are your thoughts? Drop me a line, I’d love to hear. Happy selling.

Lisa B

Dominate The Internet and The Real Estate Marketing Academy

Read other articles by Lisa.

 

 

 

 

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