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What’s the difference between real estate commission and fixed fee?

December 4, 2019 11:00 am by Upside

Real estate agents – they’re all the same, right? They all charge fees, so what difference does it make if it’s a commission or a fixed fee?

Well, the difference between the types of fees for selling your property can be substantial. When it comes to the pointy end of real estate sales, they can make a big difference to the bottom line – so here’s why people selling with fixed fee agents are going home with a lot more money from the sale of their homes.

What is a real estate commission?

A real estate agent commission for selling a home or investment property is expressed as a percentage of the total sale. That means the more your house sells for, the more money the agent receives at the end. Given how much house prices rose over the last decade in Australia, real estate agents have received a substantial pay increase as a result of this fee structure.

How do real estate commissions work?

When you sell a property with a commission-based agent, the commission percentage is agreed on before it goes to market. Once the property is sold, that percentage amount is payable to the real estate agent by the seller. Some real estate agents stipulate that you must pay the commission even if the sale of the property falls through before settlement. This is known as unconditional commission.

To avoid bearing the burden of this cost unnecessarily, make sure that the buyer’s holding deposit is at least worth the cost of the commission, or go with a fixed-fee real estate agent and avoid the commission altogether.

How much can I expect to pay in commission?

Real estate agent commissions vary depending on which real estate agent you choose, what state you live in and how much your property sells for. However, here’s what you can expect to pay if your home sells for the median price at the average commission in each city:

City Median house price Commission payment
Sydney $1,079,491 $26,555
Melbourne $855,428 $17,536
Brisbane $562,847 $15,760
Canberra $738,864 $16,107
Adelaide $538,550 $12,656
Perth $527,107 $14,021
Darwin $521,651 $14,606
Hobart $482,960 $14,296

Median house price source: Domain State of the Market Report September 2019

What is fixed fee real estate?

A fixed or flat fee agent will do all the work of a commission-based estate agent, but they’ll only charge a set amount. The price is agreed on at the beginning, secured with a deposit, and the balance is payable following the sale of the house. This means that fixed fee real estate agents work in your best interest – not their own.

At Upside, our fixed fee agents:

  • Work for a fair salary, so they don’t have to make quick sales to guarantee their income
  • Have performance-based bonuses rather than commissions, so they’re incentivised to provide the best service
  • Make of a central head office and technology to manage all marketing and - administrative activities, which translates to greater efficiency

What’s included in the fixed fee?

Inclusions for real estate services differ depending on the agent. At Upside, our fixed fee includes:

  • Agent managed viewings and open homes
  • Property appraisal
  • Buyer call-backs and negotiation
  • Photography, copywriting and floorplan
  • Large photo signboard, flyers and dropcards
  • Advertising on Realestate.com.au and Domain
  • Exclusive online sale progress and buyer's tracker
  • 24/7 customer experience centre

Some other agents will charge additional fees for services like photography, signboards and online advertising, so it’s a good idea to check the fine print before signing a contract.

How much can I really save with a fixed fee?

In Sydney, the median property price is over $1 million. Let’s say you sell your home for that and have agreed on the average NSW agent’s fee of 2.46%. That means you’re looking at giving the best part of $25,000 to your estate agent (especially once you factor in marketing costs, which are usually not included).

If you’d chosen a flat fee agent, you’d probably see a lot more of your profit on the sale of your house. Upside charges a standard flat fee of $8,900 (including all marketing and other costs that most agents charge as extras), no matter what your house sells for. That leaves you with $16,000 extra in your pocket.

More on this topic:

If you want to ditch the real estate agent commission percentage and get a fairer deal on the sale of your home, get in touch with us for your free property appraisal to get the ball rolling.

Upside

Upside is an Australian-owned, full-service real estate agency with one low fee and no commission. Our standard is other agents’ ‘extras’, delivering vendors a complete agent managed service including a full appraisal, open home management, copywriting, photography, signage and advertising. It's the way real estate should be.

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