Real estate commission in NSW: what agents charge

What the percentage means in dollars

Percentages are quick to agree to and hard to feel. Converting them is the useful step.

• $800,000 at 2.2 percent is $17,600
• $1,200,000 at 2.0 percent is $24,000
• $1,500,000 at 2.0 percent is $30,000
• $2,000,000 at 1.8 percent is $36,000
• $3,000,000 at 1.6 percent is $48,000

Fixed commission and tiered commission

A fixed commission is a flat percentage of the whole sale price. It is the most common structure and the easiest to compare between agencies.

A tiered or incentive commission applies one rate up to a threshold and a higher rate above it. The pitch is that it motivates the agent to push for a higher price. Read the threshold carefully, because it is usually set close to the expected sale price, and the higher rate then applies to a band the property was likely to reach anyway.

GST applies to commission and is often quoted separately. A rate quoted as 2 percent plus GST is 2.2 percent of the sale price in practice.

Marketing is charged separately

Commission does not include the campaign. Photography, floorplans, portal listing fees, signboards and print advertising are billed on top, and in most agency agreements they are payable whether or not the property sells.

Marketing packages commonly run from around $2,000 for a standard suburban campaign to well over $10,000 for a prestige property with video and print advertising. Ask for the itemised cost before signing, and ask specifically what happens to it if the property does not sell.

What the agency agreement commits you to

The agency agreement is the document that matters, and the commission rate is only one line in it. Three other terms carry real consequences.

The exclusive agency period fixes how long the agent has the sole right to sell. During that period, in most agreements, commission is payable even if you find the buyer yourself. Sixty to ninety days is common, and it is negotiable.

The continuing agency clause extends the agent's entitlement after the exclusive period ends, typically to any buyer they introduced during it. This is why a property that sells shortly after an agreement lapses can still attract a commission.

The marketing authority is your agreement to pay the advertising costs. Confirm the figure is capped, and that nothing above it can be spent without your approval.

The argument the commission rests on

A commission is charged on the expectation that an agent will secure a higher price than you would achieve otherwise. That expectation is reasonable and it is also untestable, because a home is sold once. There is no way to know what the same property would have achieved through a different campaign.

What can be measured is the fee, and the hurdle it sets. Where an agent does achieve a premium, that premium has to clear their commission before you are ahead. On a $1.5 million sale, an agent would need to secure more than $30,000 above what you could achieve yourself simply to break even against the cost of using them.

This is not a criticism of individual agents. It is a feature of how the commission structure works, and it is worth doing the arithmetic before signing rather than after.