Anyone can put a price on a property, put up a sign and wait for someone to come along and buy the house or attempt to negotiate.
Although it's easy enough to get into real estate. Real estate Agents are professionals, trained in the art of marketing and negotiating to sell your house for the best price.
The agent can't afford to work for nothing, so they have a “cost” normally called a commission. A good agent is worth their weight in commission, and the best thing is as the seller, if you don't sell you don't have to pay them a cent in commission.
Unavoidable costs associated with selling a house can include:
- Your agent's commission
- Auction costs (If selling at auction)
- Marketing fees
- Search costs
- Discharge of mortgage (in many instances)
- Rates and taxes after settlement
- Lawyer's or Conveyancer's fees
- Government Costs
- Moving costs
Understanding Real Estate Commission Rates
Commissions are not regulated. However it is a competitive industry and agents can set the commission rate, so it's good to get at least two different agents to present their options for sale as well as their commission.
The commission can vary and you need to determine who you feel is the best fit for you, and who you feel will be working to get you the best price.
There are number of different styles of commissions, two that I will employ will be set commission or tiered commission. A set commission on a $500,000 house could be shown with commissions:
2% = $10,000
2.5% = 12,500
3% = $15,000
Keep in mind that most agents will receive around half (or less) of this commission, with the agency and brand wanting their cut. The sale of a house could be fast, slow, or not at all depending on how the market reacts to the property (presentation, price, marketing), the sellers price expectations, and the skill of the agent to negotiate the best price.
A tiered commission rate can be presented in a couple of ways. For example:
2% up to $500,000 and 15% of anything else above $500,000.
So for a sale of $520,000 the agent would see $10,000 + $3,000 = $13,000
2% up to and including a final sale price of $500,000 or 2.5% over and above a final sale price of $500,000. Giving the agent more incentive to increase the final sale price of your property.
So a sale of $490,000 would mean a commission of $9,800 or a sale of $520,000 would mean a commission of $13,000. So for an extra $30,000 netted the agent an extra $4,000.
An auctioneer is required when selling your property at Auction. An Auctioneer can cost around $500-$700 for the auction. This fee includes bidding registration and paddles. The Auctioneer will have some involvement in the lead up to the auction, discussing auction day and reserve setting throughout the process.
Depending on how much of a local event your agent wants to make it, you can put in a little more money for marketing in getting people to come along and enjoy the show.
Marketing a property is very important.
You could have the most beautiful house, and be looking to sell your house for a $5 note. But unless you advertise (Market) it, no one will know about it.
A marketing budget can start from as little as $200, and go all the way up to tens of thousands of dollars depending on what you're looking to achieve. Your agent should have a marketing plan that is easy to follow and understand why they want you to invest your money to sell your house.
If you would like more information on the marketing you should be thinking about, head over here.
Using a Conveyancer is a no brainer. The process is not as simple as signing a few papers.
They are trained in the legal side of the contract transfer for houses. The cost is outweighed by the potential headache not having one on your side could be.
Like a real estate agent, conveyancers aren't locked into a fixed price. You can find a Conveyancer for as little as $250 all the way up to $1000. Or utilise a solicitor or law firm who don't have their own set fee and you could end up forking out a few thousand dollars.
Ask your agent whether they have a good conveyancer they use regularly.
Other Unavoidable Expenses
Other expenses that you may not see coming include when you choose to sell:
- any repairs prior to sale
- any repairs that come up in building and pest inspections
- any expenses getting your property ready to sell – gardening, cleaning, painting, skip hire for rubbish.