Why it pays to shop around for the right agent
If you're planning to sell your home this spring, do you really know how much that transaction could cost you? It's a significant amount – and you'd certainly shop around if you were spending a figure like $25,000 on something else.
Yet many vendors go with the first agent they meet. We asked Agent Select CEO David Ginnane for his expert tips on choosing the perfect agent for your property – and negotiating the best commission structure and service agreement.
Q. In such a competitive property market, why is choosing the right agent to sell your home so important?
A. Quite simply, the right agent will give you the best sales outcome at the most appropriate cost level.
In Australia, real estate commissions total more than $6 billion per year. It's important for vendors to take control of such a high involvement, once in a decade transaction. While it's important to like an agent's style, don't lose sight of the importance of the commercial aspect of the deal.
While it’s important to like an agent’s style, you need to also look at the commercial aspect of the deal
Q. What are the biggest misconceptions you see when it comes to choosing a real estate agent?
A. Most people make a default choice of the agent with the highest profile in their area. But you need to look at the specific attributes of your property first. The best performing agent for a two bedroom apartment will be quite different to the one who mostly sells four bedroom freestanding homes.
The other thing some vendors do is focus too much on commission. If you negotiate hard to get the fee down, you risk the agent losing interest in marketing your property professionally – and potentially miss sales opportunities. Go too low and you might be delegated to a less experienced member of the team.
Q. Once you have a few quotes to compare, what are the three most important factors to consider?
A. First, check the commission structure. Ultimately, that's the price you'll pay. Most agents default to a fixed percentage commission, but I always suggest trying a more flexible tiered fee structure. You can protect your downside while still giving the agent an incentive to over-perform.
Next, look at their marketing strategy. Is it right for the type of buyer you want to attract? You need to know who your house will appeal to, and your agent should demonstrate that through their recommendations.
There's no real right or wrong when it comes to the mix between print and online advertising. If you're appealing to international investors, you probably need a targeted digital strategy. Or if your house is perfect for a downsizer, and they tend to live in a certain area, then print advertising in that area may make more sense.
As a rule of thumb you should budget around 1 per cent of your home value for marketing costs.
Lastly, make sure you're comfortable with the agent's service delivery commitment. Find out how often they'll give you a marketing update, and whether the listing agent will commit to being onsite for every open house.
Q. Does a higher commission usually pay off in a price premium on your sale?
A. Sometimes it does, but you need to take control of the process and be informed. Look at the average commission payable in your area and weigh that up with what the agent is offering. Yes, the agent may be more motivated by a higher fee structure, but you're just shifting value to them.
That's why it makes sense to protect yourself with a tiered rate. For example, you may pay 2 per cent up to a $500,000 sale but 3 per cent for every dollar over that.
Q. How does an exclusivity period typically work?
A. This is really important to understand – because in my experience 99 per cent of people don't know what an agent exclusivity period really means, even if they've sold a property in the past. If you sign an exclusivity period agreement, you can't use any other agent to sell your property during that time. Even if the agent is doing a terrible job, your hands are tied.
Typically these periods are around 60 days but we encourage vendors to negotiate that back to 30 days – and I certainly wouldn't agree to anything more than 60. The longer the period, the better it is for the agent.
Q. What agent 'promises' would set off alarm bells for you?
A. An agent's appraisal is not a valuation. Agents are motivated to secure your listing and they are renowned for being bullish when it comes to appraisals. And that can lead to disappointment – because when you finally get an offer, they'll tell you 'market conditions have deteriorated' so they can't achieve the upside from their appraisal.
So it's worth researching online to get an independent understanding of your property value. If the agent is promising $650,000 but all the online data suggests it's more like $500,000, I'd be asking that agent a few more questions.
Q. Is it essential to pay for 'extras' like home styling and rental furniture when you're selling?
A. The presentation of your property is absolutely paramount – you need to make sure it's as appealing as possible for your target buyer. But if you're selling a student apartment for example, you won't need to spend $15,000 on top end furniture and a stylist. If it's a five bedroom executive residence in Sydney's Eastern suburbs on the other hand, it's a small investment compared to the potential additional return.
Q. What is your number one tip for sellers in the current market?
A. Get the best agents in your area to compete for your listing. That gives you an empowered choice. If you're better informed, you can make a more confident commercial decision.
Q. So how do you find the best 'high performance' agent for your property?
A. You need to compare the quotes from the best agents in your area, taking into account your property type, how much similar properties have sold for, and the agent's performance history. Agent Select can help with that – we've made the process really simple, and we can match your property type with performance data for more than 40,000 agents across Australia.