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  1. #1
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    Default RE Commissions - what for?

    So we're going to be selling our house at some point this year and I have been looking at what real estate fees are charged. Most charge for advertising & photos, fair enough. But what do they actually do to earn their commission?

    I ask as when DH & I bought this house, we looked solely on real estate. com or on Domain. We never even bothered with a RE's own website out going to RE offices as they were all on RE.com. Open house times were listed online. So I guess I'm wondering why we'd pay $15-20K to a RE Agent to "sell" our house, when our actual involvement with an RE agent when purchasing was very minimal... The agent didn't sell us the house, or talk us into a higher price. We bought as we liked the property and our first offer was accepted.

    Is there something I'm missing in this equation?? Why do people give such a huge amount of sale proceeds to a RE agent? (Genuine question - not having a go at RE's)

    Has anyone sold their property without an RE?

    Thanks

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    I suppose some of it is facilitating that transaction, helping with contracts etc. As a buyer I would be reluctant to buy a house without the seller using an agent in case we made mistakes with the contract etc. I guess lawyers are involved as well but theyre expensive in comparison to asking the agent a simple question.

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    I've worked in real estate for 15 years now, and although most of that has been in rental admin I've had a fair bit of exposure to the sales side of things. In my last job on reception I heard many deals being done in the consulting rooms behind my desk. Some agents actually did manage to get more money out of purchasers. This takes a lot of skill...some agents had it, some not. Some agents were great at listing, some made their money purely on selling (at my office the agents could bring buyers to other people's listings, and share the commission).

    One of our rival estate agencies had a reputation for being better for buyers (and therefore sh!t for vendors), whereas my office was known as being good for vendors (better sale prices than the rivals).

    Anyway, there's my insiders take on it. I have sold using an estate agent and I chose one that was known for getting excellent results at auction (and I did, made 67% capital gains in just 2.5 years, and I do think that my agent worked really hard to get the last two bidders up by tens of thousands of dollars).

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    We recently bought our house through private sale.
    I can say with certainty that REAs save you a lot of thinking about what you have to do next or what should be done and by when or how. They iron out a lot of the kinks.

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    We recently sold our house and the RE agent really did earn his commission. He didn't just attend open homes, he took people through every few days for private inspections. If someone called about one house he had listed, and it was already under contract, he'd direct them to our house. We had a lot of people come through looking at our house because another house of his was under contract but still listed online. Within a week of being listed we had an offer. He negotiated with buyers to try to get the price we wanted. And the one time we were present for an open house I discovered just how horrible it is hearing people try to bargain your house price down - telling you how awful the house is and that you're completely unreasonable. I learnt that day how wonderful it is to have an agent to be the middle man for you with buyers so that you don't have to hear the 'honest' feedback of buyers trying to pick up a bargain.

    And it wasn't just price that was negotiated, but contract terms too.

    With out first house, I don't feel the agent did a great deal. Now I realise he was probably just so good that we didn't see the work he put in as he made it look easy. With our second house I don't begrudge our agent his commission. He worked 7 days a week, and he worked well into the evening - he'd drop round at 8pm to go over contracts with us.

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    Quote Originally Posted by Frankenmum View Post
    Has anyone sold their property without an RE?

    Thanks
    We sold a block of land without a RE. In hindsight we would have gotten a better price had we employed a RE.

    If you have a home that is fairly standard for the area you live in, well maintained and the market is strong, a home owner may find it relatively easy to sell a house because it would get a lot of interest simply because it had been listed.

    However, in my mind it would difficult for a novice to sell a house in a weak / falling market, or a house in need of major repairs and maintenance, or unique to the area / non flowing floor plan etc.

    We've sold two homes before using a RE. House #1 - got lots of interest because it was starter home in a very desirable location - the RE negotiated a much higher price for us than we were first offered.

    House #2 - house in a dress circle location for the suburb, nightmare block of land (very steep) with a very unique floorplan (therefore would not appeal to many people), market went flat. RE # 1 was beyond useless, kept on bringing people back to look at the house who were not serious buyers. It sat on the market for months. RE # 2 was fab and sold it for us within a week.

    You could always negotiate commission with the RE and give them a bonus if they sell your house for more than $x .
    Last edited by SSecret Squirrel; 12-01-2016 at 22:39.

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    Default RE Commissions - what for?

    Australia has the lowest commission rates in the world for real estate - 1.8% ( or lower) - in the USA for example it's 6%

    It would be a dream if all sales were as easy as we saw it on line and bought it that day , it does happen but there is a lot of work gone into beforehand , on average they say a buyer usually sees 20 properties before buying one, plus the vendor obviously wants a certain price so it's rare the two agreed straight away

    The reason private sales and those sell your own home websites never work in the majority of the time is because buyers want a good deal and sellers want a good price and the emotion involved is usually too hard to handle plus sellers just don't know the law and the risks involved and are usually not objective when selling their own home - negotiation is a skill and buyers and vendors sometimes never know how much work their easy first time offer actually took

    If I have 4 auctions running a month this would be my typical week of servicing them:
    In sydney our average open house inspections are approx 20 per open plus a few during the week so every Monday I have to call roughly 100 buyers to see what they thought of the home, update all their details in our system , follow up with more inspections for those interested, try obtain offers from interested parties, put all that info into a written report for the owners and repeat x 4 weeks plus weekly ( usually evening ) meeting with all the owners at least once , re ringing all interested parties during the 4 week campaign to get them ready for the auction, most of our auctions have between 2-10 registered bidders so we need to get solicitors, valuations, pest inspections ect sorted for all of them so they are ready to bid, plus deal with the vendors, take up to 20 plus email enquiries a day, sort out the marketing which does take time , then hoping it all works out auction day as obviously no buyer tells me what they will pay or if they will turn up - remember for those 400 people I've had to deal with in that month only 4 will possibly buy something from me ( and in bad markets none) so I'm technically dealing with all those other buyers for free but need to do it to make sure I find the right ones for my owners, add into that I need to prospect daily to find new properties, so cold calling streets, past clients and letterbox dropping to get appraisals of which are also free until they actually decide to sell then unusually compete with 3 other agencies to get the business - I then ring all those hundreds of buyers on my data base to tell them about the new home I have coming up before marketing even starts!

    It costs us $60,000 a month to keep our office open , rent , staff, insurances, stationary, technology etc and unless we sell
    Something in 30 days or less it cuts into any profit we make - if a home took us 90 days to sell and we earn $20,000 it sounds a lot but add into it running costs and staff costs for 90 days the $20k wouldn't make us any money yes we do sell homes in a few days and earn $20k straight away but on average it evens out - real estate sales has the highest turn over of staff as the money is not that great if you have not been in the business for years establishing yourself when you work out the hours you work so when you get a good agent they are worth every cent!
    Last edited by Elijahs Mum; 12-01-2016 at 22:58.

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  14. #8
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    Thanks so much for the input everyone! Definitely helped me to understand what an REA does for their commission and potential pitfalls of not having one.

    I've done real estate conveyancing in the past, so am pretty much across the legal side of the process, so just wasn't sure from the RE perspective.

    We are in a really strong position for selling our house. It will be reno'd and landscaped before we sell, fantastic location, nice suburb, character home with original features (but modernised kitchen bathroom etc). Houses like ours are being snapped up at the moment.

    A lot to think about! It's all a bit overwhelming 😨

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    Our estate agent advised us on presentation and managed to get multiple offers. She helped track down data relating to an outside office with the council. We paid $15k for her services, but sold at $35k above asking price in an average market. A good RE is worth their fee.

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    You're also paying for their network. There are a few agents in my local area who are incredibly well known and have been working in the area for 15-20 years. They market themselves well and therefore know a lot of people so have a big network to call on to buy your house.

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