Real Estate Agent Commission Explained

Why Commission Is Important — But Often Not The Most Important Thing

One of the first questions property sellers ask is:

"What commission does the agent charge?"

It's a reasonable question.

Commission is one of the costs associated with selling a property.

However, many sellers make the mistake of focusing solely on commission while overlooking the factor that may have the greatest influence on their final result:

Negotiation skill.

The reality is:

Most agents can find a buyer. Far fewer can negotiate the highest possible sale price.

A lower commission does not automatically mean a better financial outcome.

In many cases, the quality of the agent's negotiation may have a greater impact on the seller's net proceeds than the commission percentage itself.

Reality Check

Many sellers believe negotiating the lowest commission is the best way to maximise the money they keep from their property sale.

It's an understandable assumption.

However, the biggest mistake many sellers make isn't paying too much commission.

It's assuming that all real estate agents are likely to achieve the same sale price.

While no one can guarantee the exact price a property will sell for, different real estate agents can achieve very different outcomes through their strategy, buyer management and negotiation skills.

That's why commission should never be considered in isolation.

The most important question isn't:

"Who charges the lowest commission?"

It's:

"Which real estate agent is most likely to leave me with the most money after my property has been sold?"

What Is Real Estate Agent Commission?

Commission is the fee paid to a real estate agent for selling a property.

It is generally calculated as a percentage of the final sale price, although some agencies may offer alternative fee structures.

Commission arrangements vary between:

States and territories
Agencies
Property types
Market conditions

The exact structure should always be clearly explained before an agency agreement is signed.

How Commission Is Typically Calculated

Most commission arrangements are based on:

A percentage of the sale price
Plus GST where applicable

For example:

Sale Price: $1,000,000
Commission: 2%

Commission Payable: $20,000 plus GST

Some agencies may offer alternative structures such as fixed fees or performance-based arrangements.

Why Sellers Focus On Commission

Commission is one of the easiest things to compare.

Many sellers naturally assume:

Lower commission equals a better deal.

However, selling property is not simply a cost exercise.

The objective is maximising the seller's overall financial outcome.

A slightly higher commission may be justified if the agent achieves a significantly better sale price.

The Hidden Cost Of Choosing The Wrong Agent

A small saving on commission can quickly disappear if another real estate agent was more likely to negotiate a substantially higher sale price.

Consider two hypothetical agents:

Agent A

Commission: 1.5%
Sale Price Achieved: $1,000,000

Agent B

Commission: 2.0%
Sale Price Achieved: $1,040,000

Although Agent B charges a higher commission, the seller may still achieve a substantially better net result.

This highlights why commission should never be assessed in isolation.

Marketing And Negotiation Are Different Skills

Many sellers compare:

Commission
Marketing plans
Appraisals

before considering negotiation ability.

Yet negotiation often determines the final outcome.

Remember:

Finding a buyer and negotiating the highest possible sale price are two completely different skills.

Keep in mind, every buyer is trying to purchase your property for the lowest possible price.

Your real estate agent should be just as committed to negotiating the highest price the market is prepared to pay.

A strong negotiator may create:

More competition
Better offers
Improved terms
Higher sale prices

These benefits can easily outweigh small differences in commission.

Are Higher Commissions Always Better?

No.

A higher commission does not automatically indicate a better agent.

Similarly, a lower commission does not automatically indicate poor performance.

The key question is:

What value am I receiving for the commission being charged?

Sellers should assess:

Negotiation ability
Communication
Experience
Strategy
Market knowledge

alongside commission.

What Other Costs Should Sellers Consider?

Commission is only one component of the selling process.

Additional costs may include:

Marketing expenses
Photography
Floor plans
Advertising
Auction costs
Administration fees

Sellers should always request a clear breakdown of all expected costs.

Are Commission Rates Negotiable?

In many situations, commission rates may be negotiable.

This depends on factors such as:

Property value
Market conditions
Agency policies
Competition between agents

However, sellers should be careful not to focus solely on achieving the lowest commission.

The strongest overall outcome remains the ultimate objective.

Why Some Agents Charge More Than Others

Commission differences often reflect:

Business models
Service levels
Market positioning
Resources
Experience

Rather than asking:

"Who is cheapest?"

consider asking:

"Who is most likely to achieve the best result?"

Comparing Commission Properly

When comparing commission proposals, consider:

Sale Price Expectations

Are appraisals realistic?

Negotiation Capability

Can the agent demonstrate strong negotiation skills?

Marketing Strategy

Does the proposal make sense?

Communication

Will the agent keep you informed?

Evidence

Can the agent support recommendations with data?

Why Independent Advice Can Help

Comparing commission proposals isn't always as simple as comparing percentages.

Different real estate agents often recommend different commission structures, marketing budgets, pricing strategies and selling methods.

Understanding which proposal is most likely to produce the strongest financial outcome isn't always straightforward.

That's where independent advice can make a real difference.

A Vendor Advocate (Independent Selling Advisor) helps property owners objectively assess commission proposals in the broader context of negotiation ability, marketing strategy, pricing advice and overall value.

Independent advice isn't about finding the cheapest commission.

It's about helping you keep the most money after your property has been sold.