Low commission real estate - is it ever a good idea?
Selling a house can be a costly endeavour, with real estate commissions often eating into what you could be putting in your pocket.
In recent years, a growing trend has emerged: low commission real estate services that promise to save sellers money. While the idea of reducing expenses can be appealing, it's important to carefully consider the implications of opting for a low commission real estate agent.
In this article, we'll explore the pros and cons of using a low commission real estate agent and shed light on why some individuals may be attracted to this option.
Pros and cons of using low commission real estate
Pros of low commission real estate
- Cost savings: One of the main advantages of low commission real estate is the potential for significant cost savings. Reducing the agent's commission can help sellers retain a larger portion of the final sale price.
- DIY approach: Some sellers prefer to take a more hands-on approach to the selling process. With a low commission service, they have the opportunity to be more involved in tasks such as marketing, staging, and showing the property, allowing them to have more control over the process.
Cons of low commission real estate
- Reduced service quality: Working with a low commission real estate agent may result in reduced service quality. Agents operating on lower commissions may have less incentive to invest time, effort, and resources into effectively marketing your property, potentially leading to decreased exposure and limited buyer interest.
- Lower expertise and experience: Low commission agents may have less industry knowledge, a narrower network of contacts, and a potentially less impressive track record of successful transactions compared to full-service agents. This lack of experience and expertise can impact negotiations, legal documentation, and overall guidance throughout the selling process.
- Potential conflict of interest: Low commission agents may rely on high transaction volumes to compensate for their lower fees. Consequently, they might prioritise closing deals quickly rather than focusing on obtaining the best possible outcome for their clients.
When low commission real estate makes sense
Undoubtedly, the primary allure of low commission real estate is the potential for significant cost savings. Selling a home involves numerous expenses, and reducing the agent's commission can appear as an appealing way to cut costs.
While there are inherent risks associated with low commission real estate, it may still be a viable option for certain individuals.
Sellers who already have a good understanding of the real estate market, may simply need an extra hand in activities such as marketing the property and scheduling inspections.
If they already possess excellent negotiation skills, and are confident in managing the intricacies of the transaction, they may find value in a low commission service.
Should you use low real estate commission agents?
While low commission real estate services may appear enticing due to the potential for cost savings, it's important to consider the overall implications.
For most people trying to sell their home, it probably isn’t the best idea.
A thorough evaluation of your own knowledge and capabilities, coupled with an understanding of the current market conditions, can help sellers determine whether the benefits of cost savings outweigh the potential drawbacks.
If you’re looking to sell your house, it’s highly recommended to find a professional real estate agent in your local area.
How much commission do real estate agents make?
The average real estate commission agents charge varies between states and between metro vs. regional areas. Across Australia, the average charge is around 2% to 2.5% of the sale price of your home.
This means you would pay $20,000 to $25,000 when selling a $1million house.
If you’re unsure, use our commissions calculator to estimate how much commission you'd be paying on the sale of your home.
Should you use a low commission real estate agent?