Nothing personal, but many real estate agents will want to sell your property as quickly as possible and pocket the commission.
At an average of two to three percent of the selling price ($10,000–$15,000 on a $500,000 sale), commissions are a powerful incentive to close the deal.
Which is why a seller has two big worries:
- An agent may overvalue your property just to land your businesses.
- An agent may undervalue your property so it sells fast.
So how do you find a trustworthy real estate agent?
1. Do your homework on price
- Keep a close watch on recent auction and sales results in your area.
- Consider hiring an independent valuer to determine the worth of your home.
- Visit properties for sale in your area so you can work out whether an agent is overestimating or underestimating the value of your property.
- Pay attention to how agents answer questions such as "why is the owner selling?", "how negotiable are they on price?" and "how long has the property been on the market?" This will give you a sense of how agents might field these tricky questions regarding your property.
2. Do your homework on agents
When choosing an agent, here's a list of things to consider:
- Proof that they're licensed in your state.
- Are they merely a salesperson under the agent's authority with less training and qualifications?
- Evidence of success in your area.
- A market value assessment that appears accurate based on your research.
- A signed market value estimate or even a price guarantee.
- Evidence of a marketing plan.
- Willingness to advise you about steps you can take to make your property more attractive to buyers.
- A commitment to give you regular reports and updates.
- Are you rushing into making a decision about which agent to go with? Go and see at least three agents.
- Are you engaging the first agent you visited? Many people get stuck in a sole or exclusive agency for a set period, even if they're not happy with the agent.
Pick the best real estate agent for your needs, not simply the one who promises the highest selling price.
3. Beware inflated valuations
Going with the agent who promises the highest selling price could be a mistake.
Although the Real Estate Institute of Australia (REIA) says it's deceptive conduct, agents we spoke to said the practice of exaggerating property values to sellers is ingrained in the industry.
One former owner of a real state agency told us, "There's an old saying in this industry that the biggest liar gets the job. The number one reason that agents give high valuations is to avoid losing business. The best way to protect yourself from the quote trap is to have the agent sign a quotation guarantee. This means getting the quote in writing, and signing an agreement stating that the agent won't be paid unless that price is achieved."
The two to three percent commission usually doesn't include advertising costs, which can range from several hundred to thousands of dollars, depending on rates and where the ads are placed.
Agents' fees can be structured in different ways:
- Some agents charge a higher commission – up to five percent – which includes some advertising.
- Some charge on a 'no sale, no fee' basis.
- Some agents chart signage and advertising costs regardless of whether your property sells.
- Some agents have low flat fees, but be sure you'll also get a good price and their focus isn't just a cheap, quick sale.
- A scale of commissions may be charged, particularly for more expensive properties. For example, you might be quoted 2.5% on the first $850,000, and 10% after that. This provides a further incentive for the agent to achieve a higher price.
- You may be charged a lower commission if you share marketing and promotion costs.
Fees – your rights and expectations
- Don't pay an upfront fee – only pay your agent after the sale is completed.
- Some states require that all fees, including advertising, are set out in the agency agreement.
- All commissions and fees are negotiable, though this might not be obvious from your interactions with the agent.
- Any fees should be based on the service you receive. If you're paying top dollar, for instance, you should get a full marketing plan.
In a property market that will probably only get hotter in the long run, it really pays to do your homework.
No, there are three main types:
1. Open listing or general authority
Sellers can list with more than one agency, only paying commission to the agent that sells the property. While you may get more market coverage than with a sole agency, the sale of your property may not be as high a priority for the agents. There's also a risk that you won't achieve the best price if various agents are competing for a quick sale.
2. Exclusive authority/agency
The agent gets paid when the property sells, even if the sale is done by a different agent or by the seller. In this scenario, avoid getting locked into a lengthy contract. A month is long enough to see if it's working.
3. Sole agency
Similar to exclusive agency, except the agent may not be entitled to a commission if you sell the property yourself.
If in doubt, ask a lawyer
Some states have a cooling-off period for agency agreements. Some also place limitations on how long an exclusive or sole agency can run.
Remember, you don't have to accept the contract agreement an agent presents – you're strongly advised to have it checked by a lawyer and changed if necessary.
There's more to making sure you get a fair deal as a seller than hiring a real estate agent.
Some agents think the best price will be achieved at auction, where high emotion, pressure and competition among buyers can lead to higher prices.
Others say private sales are the way to go.
Ask different agents to explain the pros and cons of each approach for your situation.
There are no fixed rules about which types of property would be more suited to an auction or private sale, but each offers different advantages for the seller.
The advantages of selling your home at auction
- Competitive bidding, which means there's no price limit. This can be good for unusual or particularly desirable properties that are hard to price.
- It's a definite sale, assuming the reserve price is reached.
- A set date for sale encourages potential buyers to act quickly.
- Auctions can identify the most suitable buyers to negotiate with if a sale isn't achieved at auction.
The advantages of selling your home by private sale
- You'll have more time to consider buyers' offers.
- Potential buyers make offers 'blind', without knowing what others are prepared to pay.
- Advertising expenses can be cheaper than for auctions.
- No auctioneering fees.
Private sales and auctions both have their pros and cons. You have to choose the right one for your property and your circumstances.
State consumer protection agencies have attempted to end under-quoting in recent years. Under-quoting is when real estate agents advertise a property for less than its estimated selling price, or less than what the seller will accept, in an effort to drive interest.
From May 2017 in Victoria:
- The estimated selling price must be in the sales authority document and can be expressed in a range of no more than 10% ($500,000 to $550,000 for instance).
- The estimated selling price must be based on at least three legitimately comparable properties.
- Comparable properties must have been sold within the previous six months and be within 2km of the current property for sale in the Melbourne metropolitan area (and within 5km outside the Melbourne area).
- If the estimated price changes, the agent must inform the seller in writing as well as update the sales authority document and marketing material.
State consumer protection agencies have attempted to end under-quoting in recent years
From January 2016 in NSW:
- Real estate agents can't publish or state a selling price that's less than their reasonable estimate.
- The estimated selling price must be in the sales authority document (agency agreement) and can be expressed in a range of no more than 10% ($500,000 to $550,000 for instance).
- Agents can't use phrases such as "offers above" or "offers over" a certain price.
- If the estimated price changes, the agent must inform the seller in writing and update the sales authority document and marketing material.
Other states and territories have adopted similar restrictions.
Get more advice
Each state government's fair trading authority provides free advice to home sellers and buyers.