Should you use a fixed-fee real estate agent?

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There are a lot of decisions to make when selling a property.
Which agent to use is a big one. Another decision is whether to use a traditional commission-based agent or one of the newer breed of fixed-fee agents.
But which type of agent is best for you? Here’s what to consider when deciding between a commission-based and fixed-fee real estate agent.

How does fixed-fee real estate work?

The fixed-fee model has disrupted the residential real estate market. Traditionally, real estate agents charged a percentage-based commission. The higher the sale, the higher the agent’s commission. In the fixed-fee model, you’ll know what your agent’s fee is upfront and the final sale price won’t change that fee.
In most cases, a fixed-fee includes a property appraisal, marketing and advertising of the property, signboards, floor plans, and managing home inspections. Additional marketing, like printing and distributing flyers, costs extra. Homes sold on auction also incur an additional fee.

Fixed-fee vs commission-based agents — which is best?

There are pros and cons to both commission-based and fixed-fee real estate agents. To make a decision, you need to compare the two options to see which suits your circumstances the best. Here’s what to consider:

  • Commission-based agents are more motivated to aim for the highest price in order to earn a higher commission fee. This means you may receive top dollar for your house, but it also means you’ll pay higher agent fees.
  • Fixed-fee agents can be more cost-effective but this is influenced by the value of your property. For example, if you use a commission-based agent to sell a $1-million house in Sydney where the average commission is 2.01%, you’d be looking at paying just over $20,000 in commission fees. Comparatively, most fixed-fee real agents charge between $7,000 and $10,000, which is significantly cheaper. In this scenario, using a fixed-fee agent may make more sense.

Will I still be charged a fee if my home doesn’t sell?

Commission-based real estate agents get paid once the property is sold. One of the downsides of fixed-fee agents is that some require their fee upfront and, should the property not sell within a specific period, the fee is non-refundable. The incentive to push for a sale is, therefore, lower if the agent knows they’ll get paid even if the house doesn’t sell.
Some fixed-fee agents will continue to market your home if it is unsold after six weeks, but at an additional cost. So you could end up paying more than you would have with a commission-based agent. Other fixed-fee real estate agents will waive the fee if the home does not sell. Make sure you understand the terms of your fixed-fee contract so you know what to expect.

How should I choose an agent?

When selling your property, don’t focus solely on the agent’s fee structure. You should also take into account their knowledge of the local market, experience and track record. If you have any friends and neighbours who recently sold property, ask them for recommendations.

Shop around and always negotiate the fee. Research the local property market and crunch the numbers to see which option works out cheaper. Armed with knowledge, you’ll have some leverage when negotiating fees with real estate agents. Even a small percentage drop can lower your final fee considerably.

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