Flat Commission Rate

Real Estate Agents usually charge a commission based on a percentage of the final sales price of your home. The commission rate can vary from suburb to suburb as well as by the type of property you are selling.

For Example if you are selling a home worth $1m the agent may have a commission rate of 1.5% ($15,000). If you were in the same suburb selling an apartment valued at $400,000 the same agent may charge 2.5% ($10,000) as the work and effort to sell the apartment will be the same (or often more) and so they want fair compensation for their time and skill.

Flat Fee

Another way you can pay a commission is to agree on a flat fee. That is rather than a percentage of the sale price that you agree on a figure. For example the normal commission for an agent might be 1.5%. If your home is worth about $1m you may agree to have a flat fee of $15,000. That is whether the home sells for $1.1m or $950,000 you know what your cost will be.

Some may argue that the weakness in this model is there is no incentive for the agent to push for more money. In this case achieving an additional $100,000 for you they are not rewarded. But by paying 1.5% they re getting an $1,500 and you pocket $98,500.

Commission Plus Bonus

This is where the agent may suggest that they give you a lower base commission but if they exceed this figure that they are rewarded. Let's say that you feel your home is worth $1m and everything above this you would be very happy with. The commission structure may look like this.

First $1m at 1.3% ($13,000)
Above $1m at 10%

So in this scenario the agent who may have a standard commission of 1.5% is incentivised as by not achieving the 'reserve' they earn less, but the more they sell above, the more they make.

The breakeven point in this example is $1.02m. But what if they sell for $1.1m? The agent makes $23,000 so $6,500 above their standard commission.

See section on Warnings Below for more information on commission plus bonus

Is A Commission Negotiable?

Yes, you can always ask the question and this can be a good way to test the agent to see how they respond. Do you want them to fold and really give you a cheaper rate as it may reflect how they deal with your buyers also.

The most important thing to consider when agreeing on a commission rate is that everyone is happy. You don't want your agent to feel like they are not being valued, whilst they may smile on the surface, when it comes to selling and they have five clients on the go they may put you to the back of the line.

By all means if you get three quotes (which we help you do) and one is much higher, you can ask them to price match if it truly will make a difference to your choice of agent.

How Undercover Agent Get Paid (And How It Is FREE)

It is standard practice in the real estate industry for referrals to agents to receive 20%-50% of the agents commission. We are at the lowest end of the referral commission scale at 20%. This allows us to provide great service and the agents we speak to love that we are not taking them to the cleaners!

The condition is:

We don't allow agent's to bump up their fees to cover our costs.

We do a lot of background work and spend time understanding your needs and what is required to sell your home. The 20% we are paid is actually disproportionate to the time, skill and value we bring to the sale. For example if we spend 20 hours on your sale they are not spending anywhere near 80 hours.

Agent's understand this, and therefore are happy to split the commission as by working with us we have done a lot of the background work already. They not only save time but get a higher quality client (by engaging us the whole sales process is streamlined) They also want to do a great job as it could lead to future opportunities for them.

The real estate industry is riddled with conflicts of interest and we are committed to standing on our own and being a service that is ethical and works always in your interest.

We don't have favourites

Whilst we have used many agents over time and been very happy with the outcomes, each property is unique. Also agents databases change, so our process is all about the right agent for you, right now.

WARNINGS

GST

When you are talking commissions make sure that you make it clear that GST is included. A trick some agents use is to verbally say they charge 1.5%, but when you get the contract to sign it says 1.65% as it they have added the 10% GST.

Sometimes it is mentioned but when worded 1.5% plus GST your mind might focus on the 1.5%. Either way, we want your relationship to get off to the best start and don't want miscommunication to deplete trust before you have even started.

Bonus Commission (Further Notes) 

Unfortunately many agents have used this structure to take advantage of home owners so you really need to know your numbers before considering this model (and I'd suggest steering clear).

Let's say you tell an agent in an interview you feel like your home is worth $1m and you would be thrilled with that result. The agent knows you are well out and homes like yours sell for $1.1m or more. Instead of correcting you they say:

"How about we have a Bonus Commission structure where I 'discount' my fees but if I achieve $1m that I get 10% of everything above that?"

The end result is they sell for $1.1m and get paid more than they would have AND (here is the kicker) they look amazing as they have just sold for $100,000 above your dream price. See how that works? They get paid more and you sing their praises and refer them to anyone who will listen.

With Undercover Agent you always get a fair commission at standard rates so the agent is highly motivated to get you the best result and it costs you nothing additional to have our support every step of the way!

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