According to data by Local Agent Finder, real estate agent commission rates on the eastern seaboard have either fallen or remained flat for the past 12 months.
What did the survey show?
The report by Local Agent Finder surveys over 5,000 agents, with a large spread of data. It is the second time they have run the report, giving them a chance to compare data from the previous year to show trends, falls and rises.
Matt McCann from Local Agent Finder said: “What we’re seeing in the eastern seaboard particularly is that commission rates are starting to come under pressure. We’re not seeing increases. We’re absolutely not seeing increases. And when you start to think about New South Wales being slightly down, Victoria being flat, and Queensland being slightly down, you’re starting to see what we think is the implication of having fewer transactions in the market.”
Why and where is this happening?
Part of the study showed that Australia’s highest average commission rate is found in Tasmania, with 2.96%. As property prices have got ahead of where agents’ commissions have adjusted, people in Tasmania seem to have grown used to a near 3% commission. These figures would be expected to come down to a more normal level of 2% as the market matures and evens out.
Matt said: “I think there’s something in quality and commission rates and the way we think about commission rates, particularly as being gating items. We see that day to day in our service where if someone is too low in terms of what they’re charging in their commission rate, then we know that there’s a question mark over their quality. If they’re too high and price themselves out, then they don’t make the consideration set. Quality factors are things that most vendors will go to once they’ve understood where the pricing fits, so it’s getting through the gate.”
Are people looking for better agents or cheaper agents?
Lower transaction volumes compared to a year ago has put pressure on agent commission rates. It puts into question whether people are hunting for the best agents, or just the cheapest ones available.
McCann said: “Part of the reason Local Agents Finder exists in this universe is to help people find those better agents and we use the quality markers. I think, generally though, for anyone going into a transaction at the moment, where there are question marks over the value you’ll get at the other side is always going to question the cost inputs.
“The real question will be the 12 months from now. If commissions have come under significant pressure and they’ve come down a long way, that’ll be showing us a really interesting trend that generally across the market, consumers think they can negotiate a lower commission. We don’t think the data supports that just today.”
What are buyers considering when shaking hands with an agent?
Local Agent Finder’s research found that the ultimate decision to partner up with a particular agent comes down to something other than commission in the end, with many people looking for the best profit margins for their property.
Matt McCann explained: “It really is about quality markers, so it really is about how you think that agent is going to deliver for you and get you the ultimate outcome. Ultimately, the difference of 0.25% in the commission rate, it might be $5000 to $10,000 on a really big sale. But actually, if that agent is getting me $200,000 or $300,000 more on an exit value, then that’s not something you’re going to haggle over.
“I think most people come into the process going “How do I find the agent that gets me the best outcome at the end?” and they look at those quality markers. They look at market history: “What have you sold in this area of a property type like ours?” And also, they’ll look at what people say about you and the experience, and clearly, that’s a core part of our service.”
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