If you're putting your house up for sale in South Australia, you need to know what real estate agent fees and real estate agent commissions are.
It's important you're aware of all the up front costs so you can plan your finances accordingly. The commission and marketing costs associated you pay your agent are just some of the unavoidable costs of selling a property.
For an idea of what you could be paying, the national average is 2% to 2.5% of the sale price of your home. The lowest is around 1.6% and the highest about 4% - but this can vary based on where you live and a range of other factors.
"The national average for real estate agent commissions is 2% to 2.5%, with a low of around 1.6% and a high of about 4%"
Understanding real estate agents commission in South Australia
Just like other states, there is no legislation to determine what commission a real estate agent charges in SA. They are, therefore, able to determine their own fees, though in reality the local market forces - particularly the number of agents in the area - ultimately determines rates.
When it comes time to choose an agent in Adelaide or anywhere else in SA, it's important to consider all possible factors and not make a decision based on the lowest commission.
Understanding commission structures
The fees involved when hiring a real estate agent are designed to cover their costs for advertising and marketing your property, while their commission is a percentage of the sale price that they get for selling your property.
Agents don't all structure their fees in the same way. Some include the cost of advertising in the commission and quote a higher rate - so be sure to ask before you sign up.
Real estate agents work to two different commission structures - fixed and tiered.
Fixed is the most common, and is a set figure agreed when you sign a contract with the agent. To work out what you will pay simply multiply your sale price by the commission rate.
An incentive-based or tier-based commission structure gives the agent a higher rate for every dollar they get over an agreed amount. If you are looking for $800,000 for your property, your agent can suggest a rate of 2% up to that amount, and 2.5% above this figure.
This is designed to motivate your agent to work for the best possible price for your property.
"Real estate agents work to two different commission structures - fixed and tiered"
Calculating commissions in South Australia
To get an idea of what you commission you could pay in SA, we used our Real Estate Commission Calculator to cover a range of sample postcodes - urban and rural - from the state. This also highlights the difference a few percentage points makes to what you have to pay your agent.
In the beachside Adelaide suburb of Glenelg, the average agent commission rate is 1.94%, which equates to $15,520 commission on a $800,000 sale
In the rural town of Port Wakefield, 98.7 kilometres from Adelaide, the average agent commission rate is 2.88%. You would pay a commission of $23,040 to your agent on a property worth $800,000
In the picturesque tourist town of Hahndorf, the average agent commission rate is 2.5%, which would mean you paying $20,000 to your agent on a $800,000 sale
What factors influence the commission rate?
The commission you pay an agent is dependant on a range of factors, including where you live, how agents price their fees, their experience and the value of your property.
Let’s take a look at these in more detail:
Where you live
Location is everything when it comes to property, and this also applies to the commission you will pay in your suburb or postcode. If you live in the inner city, CBD or other high density urban area you can expect to pay a lower commission than outer suburbia or rural towns and smaller cities.
Why the discrepancy? Simple market forces - the more agents in an area the more competition for your business, which drives down the rate. Contrast this with an area where there are fewer agents competing, which leads to slightly higher rates.
As we saw above, urban Adelaide had a rate of around 1.94%, while residents of rural Port Wakefield pay 2.88%.
"Location is everything when it comes to property, and this also applies to the commission you will pay in your suburb or postcode."
How agents price their services will also impact the rate they charge. Some agents group their marketing fee with the rate - which makes it slightly higher.
This is a question you need to ask when you are screening and interviewing agents, so you know what you are paying and can compare apples with apples.
Experience of the agent
Newbie agents may well offer a lower commission rate than other agents to try drum up more business. Should you go for the lowest rate? We think you should look at a range of factors, specifically their performance and how much success they have had selling properties like yours.
The value of your property
If you live in a high value, luxury home you are more likely to be able to negotiate a lower commission - simply because the agent’s fee is going to be more than enough to cover the effort they put into the sale.
On the flipside, however, it could also be tougher to get an agent to lower their rate if your property is at the lower end of the price scale.
What other costs do I need to be aware of?
There are other costs associated with the sale of a property. These can include:
Marketing costs - they can vary a lot, from around $500 into the thousands – depending on the demographic you want to reach and how diverse you need the advertising to be
Discharge fees for your existing mortgage, which can vary by provider
Rates and taxes up to the final settlement date
Legal and/or conveyancer's fees
The cost of hiring a removalist or storing your possessions
How to pay the lowest possible commission
How do you pay the lowest possible commission to your agent?
The first step is to know what commission rates are in your area. You can then work out if a rate is competitive. Also be prepared to play hardball and pit agents against each other, and force them to negotiate.
That doesn’t mean you should choose the agent with the lowest commission. Do your homework on the agent’s performance and history in the local market. They need to have a track record of sales to match their rate. They should also have experience selling properties like yours, and know the local market really well.
Use our Real Estate Commission Calculator to work out the average real estate commission where you live in South Australia.