Are you paying too much for too little?
by Neil Jenman
Article written and provided by Neil Jenman from Jenman.com.au . To see the original source of this article please click here. https://jenman.com.au/watching-real-estate-commissions/. Neil Jenman is Australia’s trusted consumer crusader. He can support you, all the way, from choosing an agent who will get you the highest price guaranteed to when your removalist comes! You get an unprecedented level of total support. All for free. To find out more visit jenman.com.au
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Every day, home-owners ask us to find a good agent. They want us to watch over their sale process to make sure they get a good result – in price and in commission.
These sellers are “on my watch”.
Last year, in 2020, some lovely home-owners asked us to find an agent to sell their home in Mosman, one of Sydney’s most exclusive suburbs. Agents estimated its value at $10 million. “Maybe more,” said one forked-tongue agent.
In reality, of course, it was worth less, but the agents were doing what agents do – over-quoting the likely price to entice the owners. Later, when the owners had signed-up, agents who quoted $10 million were bringing offers as low as $5.5 million.
As one local home-owner told us: “That’s what many agents in Mosman do – quote $10 million and sell for $5 million.”
Well, not on my watch.
Sydney house prices are the dearest in the nation. And the commissions are among the dearest too. And that’s before the uniquely Aussie scam of slugging owners thousands of dollars in needless advertising costs. Whether we are helping you or not, say no to that scam.
Agents are loving it. Especially with inexperienced home-owners who are so thrilled at the increased value of their homes, they don’t notice they are being over-charged. Too many owners close their eyes and sign whatever agents put in front of them. A costly mistake.
As it would have been for these sellers.
But not on my watch.
Thankfully, some owners realise that the amount of commission is too much. Forget the percentage – which ranges from 0.5 per cent to 3.5 per cent – it’s the total amount that’s making owners throw up their hands and say, “Enough, no more.”
With these $10 million (quoted) homes, most agents expect to be paid $200,000, although some ask for $250,000.
Of course, agents rarely mention the total amount at first; they’d rather mention their percentage. Saying “two per cent” does not sound as much as saying “$200,000”.
That’s a lot of money for what could never be much more than a dozen hours work – if you can call what most agents do “work”. Many times, the “work” is an hour or two. Especially these “superstar” agents who sign-up sellers then palm them off to a junior.
Having spent my entire working life in real estate, I am aware of many truths that sellers often don’t realise. For example, it’s just as easy – indeed, often easier – to sell a $10 million home in Mosman as it is to sell a half million-dollar apartment at Mt Druitt.
Right now, I am helping two such sellers – another one in Mosman and one in Mt Druitt. Both need a good agent and a great price.
But why are sellers in Mosman charged $250,000 and sellers in Mt Druitt are charged $10,000?
Both sellers are getting near identical service. Indeed, at this stage, the agent in Mt Druitt has done more work than the agent in Mosman.
When looking for an agent last year for that home in Mosman, we grilled several agents. I thought a commission of more than $200,000 was too much. I thought $100,000 was enough.
But one agent’s answer floored me.
I said, “Don’t you think a hundred thousand dollars to sell one house is enough?”
His reply: “Why complain about what I am getting, look how much the owners are getting.”
I nearly choked on my coffee. I could barely splutter my reply: “But it’s their home!”
This sense of entitlement that has seized many agents cannot be justified except in the most extreme circumstances.
As I type these words, I can almost hear the thunderous abuse from agents in up-market areas. They’ll tell me that I am “stuck in the 80s” or I am “old-fashioned” or, and this is common, I “don’t understand”. Yea sure.
Okay agents, if I don’t understand, then help me. And my trusting sellers.
Please explain why home-sellers in up-market areas pay as much as twenty-five times the amount paid by sellers in less expensive areas?
The simple undeniable fact is this: Most agents are paid far too much for doing far too little in both work and negotiation skills.
What better proof than last weekend in Grove Street, Lilyfield. A home reportedly sold for $2,530,000. At 2 per cent, the agent gets a commission of $50,600.
The same home sold in 2006 for $310,000. At 2 per cent, the agent would have got $6,200.
So, in 15 years – from 2006 to 2021 – the commission to sell this one home in Sydney has risen from $6,200 to $50,600, a pay rise for the agent of $44,400.
So, there you have it. In booming Sydney, many agents’ commissions have risen by eight times in 15 years, an increase of more than 700 per cent.
What about your income?
The average salary of in 2006 was $47,000; today, it’s $68,000.
The agents have received a pay rise of 716 per cent and you have received a pay rise of 45 per cent.
The home in Mosman from last year sold for a couple of million dollars more than those “dozens” of “lowball offers”, plus the owners paid nothing in upfront advertising costs. And the commission was closer to $100,000, as it should be.
Now, in 2021, another Mosman couple are asking us to find another agent and to “ride shotgun” for their stunningly beautiful home. And in an area so popular that prices have risen almost 40 per cent in one year.
It’s our pleasure to watch over them and make sure they’re okay.
We’ll strive to get them a discount on the commission and an increase in the selling price.
Which is what should happen to all sellers.
Especially on my watch.