Commission Rates – What You Need to Know

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As with everything in life – you get what you pay for. Yes, we want to save money where we can. But we also know that cheapest is very seldom best. It’s all about the value you get for your money, not about how much it costs you.

To illustrate it simply: Most people don’t drive around in the cheapest car on the market. They drive the car that they believe gives them the best value for money, based on the features and comforts that are important to them.

The same is true when it comes to the fees you pay an estate agent for selling              your property.

Assuming that every agent would provide the identical marketing for a property, and the identical service, thus selling for exactly the same value, it would make sense to choose the agent that charges the lowest fee. That would give you the best value.

However, it’s a proven fact that agents don’t deliver the same marketing and the same service – and that both of these impact significantly on what you sell for. So surely it wouldn’t be the best value to choose the agent with the lowest fee, if it results in you selling for much less.

At the end of the day, what really counts for a property seller is what you get net – “in your Queensland-Real-Estate-Commission-Calculationpocket” so to speak.

Consider this: If Agent A sells your property for         R 2 million, and charges you 5% plus VAT,             you net R 1 886 000.

Agent B offers you much better marketing and service, and a selling strategy that attracts more buyers thus creating buyer competition. He sells your property for R 2.2 million, but charges a fee of 6% plus VAT. So you net R 2 049 000.

Which agent was the most expensive? It wasn’t the agent with the highest fee. It was the agent that offered you the worst value, and resulted in you netting a lower figure.

Sadly, all too often we see a seller selecting the agent with a low commission but offering little value. The result is a sale at a much lower price, and less in the pocket of the seller.

Does that mean the agent with the higher commission is always better value? No it doesn’t. It means the agent with the best marketing strategy, selling strategy, and that     can show how they attract the best buyers to get you the most in your pocket, offers      the best value.

Usually the cost of the better marketing and strategies is higher than the agent that offers very little. But be sure to ask your agent what value they will offer you. And here’s a tip: Get their undertaking in writing. Without a written marketing plan and service promise how can you hold them accountable?

Choose the agent who offers you the best value. It’s not the commission rate that counts – it’s what you take home that matters most.

Steve Caradoc-Davies
Principal of Harcourts Platinum, and Director of Harcourts South Africa

Email your real estate question to steve.cd@harcourts.co.za.

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