Selling a house can be a stressful and costly process, so it pays to understand all the potential costs that may be involved. Costs can vary depending on where you live, so the costs of selling a house in New South Wales may look quite different to the costs you’d expect in other states. To make this process less daunting, it’s important to be aware of all these expenses and budget accordingly for your situation.
Let’s now look at some of the expenses associated with selling a home in NSW, unpacking things like: real estate commission fees, conveyancing, and some of the additional expenses you may incur during the process of selling a property.
If you choose to use a real estate agent, commissions will be one of the more significant costs you’ll incur during the selling process. That’s not to say this is a bad thing, a good agent is worth their weight in gold, working in your interest to get you a top sale result.
In NSW, agent commission rates can vary depending on factors such as the real estate agent you use, and whether the property is located in a metro or a regional area. What you pay can also depend on the type of arrangement you choose to put in place with your agent, for example, using tiered commission rates rather than a fixed rate (more on that below.)
According to OpenAgent, in metropolitan areas of NSW, commission rates typically fall within the range of 2% to 2.5%. If you were to sell a $1 million property in a metropolitan inner-Sydney suburb, you could expect to pay anywhere from $20,000 to $25,000 in agent commission.
On the other hand, in semi-rural/regional areas, these rates are slightly higher, ranging from 2.5% to 3.5%. Here, a $1 million property sold in a regional city would incur roughly $25,000 to $30,000 in agent commission.
Commission rates are impacted by a number of factors, including the agent you use, and where the property is located.
In regional areas, commission rates tend to be a little bit higher compared to metro regions, this is because it typically can take longer for properties to sell, meaning the agent needs to work even harder to get a sale across the line.
This difference in commission fees shows the importance of understanding local market dynamics and negotiating with agents to find a fair and competitive rate.
To find out what the average commission is in your area, you can use this handy commission rate calculator.
When you start speaking to agents the topic of commissions will naturally arise. Typically sellers generally choose a fixed commission rate arrangement, but there is also the possibility of using what is known as a tiered commission structure which can be beneficial if you’re trying to really incentivise your chosen agent to get you a stellar result. The commission that’s best for you is really down to your own unique selling scenario and what your agent recommends.
It's important for sellers to be aware of these differing approaches when considering the cost of hiring an agent. We outline the differences below.
Fixed commission structure
When determining real estate agent commissions methods, the fixed commission fee method stands as a popular choice. This straightforward approach involves a basic calculation: the negotiated commission rate multiplied by the final sale price, yielding the final commission payable to your agent.
Let's say you achieve a sale price of $1,000,000, and you and your agent have agreed upon a commission rate of 2%. Applying the fixed commission formula, the resulting commission payable amounts to $20,000 ($1,000,000 x 2%).
Through this uncomplicated yet effective method, the fixed commission structure streamlines the process of determining agent commissions, providing clarity and transparency for both sellers and agents.
Tiered commission structure
As noted earlier, a tiered commission structure works to incentivise real estate agents to achieve a higher sale price for your property. It involves setting different commission rates based on performance targets that the agent hits.
Typically, an agreed target sale price is established, and two commission rates are defined:
Imagine you've sold your property for $1,000,000, and you and your agent had previously agreed upon a tiered commission structure entailing a 1.5% commission rate for amounts below the agreed sale price and a 2.5% commission rate for any portion above it.
If the sale price falls below the agreed target, the commission rate is set at 1.5%. This ensures that even if the sale price is lower than expected, the agent's efforts are still rewarded. In this case, the commission would amount to $15,000 ($1,000,000 x 0.015).
However, the real incentive kicks in when the sale price surpasses the agreed threshold. For any portion of the sale price above the agreed sale price, the commission rate increases to 2.5%. Assuming your property sold for $1,100,000 ($100,000 above the threshold), the agent would be entitled to an additional commission of $2,500 ($100,000 x 0.025).
Find out how either of these scenarios could play out for your property by using OpenAgent’s commission calculator.