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Paying For Real Estate Agents - Is It Worth It?

Real estate agents, are they worth it? This is almost always the first question that pops up in every person’s mind before engaging a real estate agent. Let us explore this by first looking at how much real estate agents charge their clients.

Real Estate Agent Commission

Unlike typical work, most real estate agents earn money only when a real estate deal goes through instead of getting paid hourly or weekly fees. While some real estate agents will charge a flat fee for their services, most charge a percentage of the home's sales price once the deal is done and this.

According to the data we gathered from most real estate websites, across the globe, the standard commission for a real estate transaction ranges from 2 to 6% of the real estate's sale price. The commission is usually split between the seller's agent and buyer's agent—meaning both agents receive a 1 to 3% cut. That works out a total of $10,000 to $30,000 (or $5,000 To $15,00 each) for a property that transacts for $500,000. Now, when you are charged a fee that high, there had better be good reasons, right?

The Real “Real Estate Agent” Work

To most of us, the real estate agent’s work only involves identifying specific homes, administration, post ing advertisements and accompanying buyers/sellers/renters for home viewing. However, for those who have never engage the service of a real estate agent, they should be made known that a good real estate agent is a great source of information on everything related to the transaction of the property and is the chief negotiator in the property transaction.

Whether you're buying or selling a house, you are dealing with such a huge amount of money that one mistake could cost you tens of thousands of dollars—and not to mention, the months of migraines that come along with it. This is no wonder why over 90% of all buyers and sellers last year chose to work with a real estate professional.

But how much does a real estate agent cost exactly? More importantly, is it worth it? Maybe you are dreaming about how much cash you could pocket if you don't hire an agent.

We get it.

But you might be disappointed at how little you save if you skip out on having an experienced professional guiding you through the deal. So, before you decide if an agent is worth the cost, let us consider all the value a good one provides. Real estate agents' fees vary enormously and add thousands of dollars to the cost of selling a home. It is difficult to avoid estate agents fees, but understanding them can help you haggle successfully – and save you serious time, effort and money.

A real estate commission covers all the work that goes into buying/selling property. To help you buy or sell a house, a seller's agent shows you how to stage your home for buyers and—since they know what similar homes in your area are selling for—they help you price it right. They also put your home in front of a ton of buyers using a multiple listing service (MLS), social media and ads. This helps you get your home sold quickly and for top dollar.

Meanwhile, a buyer's agent studies home listings that match your needs and price range. They help you arrange a home inspection and oversee any necessary repairs or contract adjustments, so you don't get a bad deal. They do everything they can to help you find and purchase a dream home that's within your budget.

Beyond those differences, both types of agents give you the confidence that a real estate professional is on your side, and they offer many similar services. For example, both agents:

  • Meet with you in person to understand your needs and answer any questions you have

  • Educate you on current market conditions

  • Give you access to an MLS—which offers more options to buyers and visibility to sellers

  • Refer other needed pros (mortgage lenders, photographers, inspectors, attorneys)

  • Schedule home showings

  • Negotiate the best price for you

  • Represent you throughout the sale and act in your best interest

  • Help you through the mountain of paperwork

Granted, this may seem like a serious chunk of change, but keep in mind that no one makes off with the whole amount! Plus, real estate agents don't see a dime until a buyer finds a home she loves, the seller accepts the offer, and all parties meet at the closing table. That process can mean weeks or months of work.

A good agent tackles these tasks day in and day out. Their experience helps you avoid rookie mistakes. Sure, you can try to handle all these things by yourself. But, when you're sitting in the hot seat of a real estate transaction, you'll quickly realize that agents are worth their weight in gold!

Understanding Real Estate Agent Cost

Generally, real estate agent fees are designed to cover their costs for advertising and marketing your property. Since not all real estate agents around the world include marketing and advertising costs in their commission structure, it is sometimes wise to prepare for these costs separately in your calculations when budgeting for the sale of your property. This can include street signage (for landed properties), online and print advertising , inclufding flyers and brochures.

The recommended budget for advertising and marketing is typically between 0.5% to 1% of your home's value. In practical terms, from a dwelling value of $500,000, you would be spending anywhere from $2,500 to $5,000 on real estate advertising and marketing. This ensures enough people see your listing and get the highest possible price for your property.

Across the globe, commission rates are generally not regulated and are agreed upon between individual agents and the buyers/sellers; therefore, a rate can vary - depending on the agent and market rate of the local housing market.

Factors that influence the commission rate an agent charges include:

  • Whether advertising and marketing costs are bundled into their commission structure or charged separately

  • The type of property, with more unusual properties typically attracting a higher commission

  • The value of your property, where agents are often prepared to charge a smaller commission for a high-end property

  • Location, with commissions varying quite widely depending on metro and regional/rural postcodes.

The reality is, when an agent works for a principal or real estate agency, they don't take the whole cut. The commission gets split and shared between the parties, making less than one would typically think. Add in franchise fees from agencies on top of this, and agents make even less - something to bear in mind when you begin negotiating fees and commission with your real estate agent.

Another factor to consider is the condition of the market. When markets are slower, commission rates tend to be higher as there are fewer properties to list for sale and it often takes much longer to sell. Not only does this mean agents find less business in slower markets, but it also means they have to work harder for you to achieve the positive results that come with an active market.

Marketing And Advertising Fees And Costs

Not sure where exactly all your money is going when it comes to real estate agents fees?

Fees vary from state to state and also from agency to agency, but the bulk of these go toward marketing and advertising your property, specifically:

  • Real estate photography

  • Creating a property floor plan and listing description

  • 'For sale' signboard

  • Open inspection brochures

  • An online property listing

  • A print property listing

  • Auctioneers fees, if you choose this sale option

When selling your home, it's a good idea to ask your agent for a breakdown of your property marketing plan's costs. Each agency may have special deals with suppliers such as photographers, copywriters and different advertising websites.

Like agent commissions, advertising costs are also not set in stone and can sometimes be negotiated with the agent. Besides, it is possible to pay for your marketing costs as they are incurred or to ask to have them built into the agent's fee, which doesn't need to be paid until the property is sold. However, it's important to keep in mind that you're required to pay these costs whether or not your property sells.

According to research, 42% of home buyers were referred to their real estate agent by an existing or previous client, and 74% of clients will provide a referral if their agent has stayed in touch with them. Referrals are inexpensive, produce results, and helps generate a potent network effect.

Some real estate sellers consider real estate commissions a hefty expense and would forgo hiring an agent to save money. However, remember that agents are professionals in the industry and spend years gaining qualifications and expertise. Paying real estate agent fees for selling a house sets you up to take advantage of their knowledge of the market. Agents will also take control of all paperwork and administration on your behalf and fetch a higher price when selling a property. Paying agent commission is money well-spent considering what they do to help close the deal, including:

  • Performing a comparative market analysis to set a competitive price

  • Arranging for photoshoots, sometimes getting aerial shots via drone in high definition

  • Writing descriptive listings that attract interest from other realtors and potential buyers

  • Listing your property on all major property search websites

  • Providing staging guidance

  • Showing the property multiple times to prospective buyers

  • Hosting open houses on weekends

  • Helping the seller review and negotiate buyer's offers

Also, many sellers who go for the for sale by owner approach end up either not making a sale or selling the property for less than the asking price. For example, say your asking price is $500,000. Is it worth saving $5,000 by not hiring an agent who charges a 1% commission rate if it means selling your house for $15,000 less?

Finally, even if you can do all the things stated above yourself, there is still one last thing which is almost impossible for a non-real estate agent to build and is the most important aspect in any real estate transaction.

And Finally – Network! Network! Network!

As much as real estate agents would love to be the go-to resource for all things related to the real estate transaction, ever-so-often there would be situations where it requires knowledge outside their area of expertise. In such situations, the real estate agent’s network would become extremely crucial. From legal to finance to home improvements advice, having a real estate agent with excellent network would ensure that you get the best and timely support you need, and almost always, at the best price.

Did you know: the real estate agent’s network is the single biggest source of leads for real estate agents; 34% of all actual closed business comes directly from an agent's network. The second most impactful lead source is paid digital advertising, but that only delivers 19% of all leads.

Unlike posting online ads, taking nice photographs for your property or knowledge on procedures for real estate transactions, such network requires years of efforts and tonnes of money (way more than the commission you have to pay) to build. Unless you are working in this line, it is definitely not economically wise for you to build such a network.

To conclude, the network of the real estate agent is the main justification for the real estate agent's fees and it is definitely worth it to engage one with a strong network!

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