20 Aug Sellers drive a hard bargain with agents – Matt McCann
Did you know that real estate agent commission rates on the eastern seaboard have fallen or remained flat over the past 12 months. It might not feel that way but Matt McCann says in one of Australasia’s hottest cities it has dropped as much as 1.5%.
Kevin: Real estate agent commission rates on the eastern seaboard have fallen or remained fairly flat over the last 12 months according to Local Agent Finder. Joining me from Local Agent Finder is Matt McCann.
Matt, what do you put this down to?
Matt: It’s an interesting set of numbers for us. This is the second time we’ve run this report, so it’s the first time we have comparable data. It’s across 5000 agents, so it’s a really large spread of data.
What we’re seeing in the eastern seaboard particularly is that commission rates are starting to come under pressure. We’re not seeing increases. We’re absolutely not seeing increases. And when you start to think about New South Wales being slightly down, Victoria being flat, and Queensland being slightly down, you’re starting to see what we think is the implication of having fewer transactions in the market.
Kevin: Part of the study showed that Australia’s highest average commission rate was coming out of Tasmania, 2.96%. It almost seems to me to be a bit of an oxymoron. More buyers… That’s one of the most popular paths of Australian real estate right now. More buyer demand you would think would make it easier to sell.
Do you think sellers are prepared to pay a higher commission to make sure they’re actually getting top dollar?
Matt: I think there’s something in quality and commission rates and the way we think about commission rates, particularly as being gating items. We see that day to day in our service where if someone is too low in terms of what they’re charging in their commission rate, then we know that there’s a question mark over their quality. If they’re too high and price themselves out, then they don’t make the consideration set. Quality factors are things that most vendors will go to once they’ve understood where the pricing fits, so it’s getting through the gate.
The piece about Tasmania is interesting, and it could just be that property prices have got ahead of where agents’ commissions have adjusted. So, people have got used to basically paying near that 3% commission rate.
With property values going up, as the market matures, we would probably expect to see those commission rates to come down, start to normalize nearer a normal level, say, of mainland commissions certainly on the eastern seaboard, which are much closer to 2% rather than that nearly 3%.
Kevin: You’re talking about lower transaction volumes compared to a year ago has seemingly started to put pressure on agent commission rates. So, I’d question whether we’re looking for better agents and not necessarily cheaper ones, Matt.
Matt: We’d absolutely agree with that, and part of the reason Local Agents Finder exists in this universe is to help people find those better agents and we use the quality markers. I think, generally though, for anyone going into a transaction at the moment, where there are question marks over the value you’ll get at the other side is always going to question the cost inputs.
I think that’s always going to be part of the equation, which is to say “Am I really understanding those things much better because there might be a chance that I don’t make as much as I thought I might make on exiting either an investment property or a home?” just because we are seeing values dip, again, a bit more extremely but particularly in the eastern seaboard.
I think that’s normal, but the real question will be the 12 months from now. If commissions have come under significant pressure and they’ve come down a long way, that’ll be showing us a really interesting trend that generally across the market, consumers think they can negotiate a lower commission. We don’t think the data supports that just today.
Kevin: I guess there’s always a danger that people are going to judge an agent based purely on their commission. There are more important factors for them to take into consideration. Did your study reveal anything along those lines?
Matt: It did, and our two years’ worth of detailed consumer research around the behavior of vendors in selling their property and what they look at, the ultimate decision to shake hands with someone, put your name on a sale authority comes down to much less than about commission at the end.
It really is about quality markers, so it really is about how you think that agent is going to deliver for you and get you the ultimate outcome. Ultimately, the difference of 0.25% in the commission rate, it might be $5000 to $10,000 on a really big sale. But actually, if that agent is getting me $200,000 or $300,000 more on an exit value, then that’s not something you’re going to haggle over.
I think most people come into the process going “How do I find the agent that gets me the best outcome at the end?” and they look at those quality markers. They look at market history: “What have you sold in this area of a property type like ours?” And also, they’ll look at what people say about you and the experience, and clearly, that’s a core part of our service.
But commission rate is important because it’s who gets on the short list. It really is a good determinant in who is one of the three agents that ultimately you’re going to seriously consider and look at those quality markers?
Kevin: How much of a determining factor is the skill of the agent as a negotiator to get a higher commission? Have you seen any evidence of anything like that, Matt?
Matt: We have. If you rank the attributes of an agent that people want when we’ve done this ranking, negotiating best outcome comes in at three or four. Understanding the market, knowing how to structure a campaign and how to market a property are probably the first two most people consider.
But I think the interesting part about the negotiation piece is I think in markets where prices are going up, there’s a little bit less pressure on that. I think we’re about to see that become a perhaps a higher ranked propensity capability from an agent is now where we’re seeing valuations not always meet vendor expectation.
I think you’ll be looking much more to ensure you have someone who really you can expect the best price for you.
Kevin: Great talking to you, Matt McCann from Local Agent Finder. Thanks for your time, Matt.
Matt: No problem. Cheers.