Real estate agents earn money from their share in the real estate commissions. The real estate commissions are paid out to their sponsoring brokers who have the license to engage in real estate transactions. It’s usually the owner or seller of the property who pays out the commissions of the seller’s agent. Even the commissions of the buyer’s agent are usually paid out of the broker’s commission.
If you want to know more information about how real estate commissions are computed and paid, you can read more about the fee structure here. The following is a short guide on the payment of real estate commissions and how much has to be paid for each real estate sale transaction:
How Much You Have To Pay
The rate of real estate commissions in Australia is fairly standard within the range of four to six percent. This rate has come to be accepted as the standard practice in the real estate industry. Sometimes, these figures can go a little bit higher or a little bit lower based on market conditions. But they don’t deviate that far from these figures.
There are still quite a number of great real estate opportunities in Sydney despite the effects of the COVID-19 pandemic. The practice generally is that it’s the seller of the property who has to pay the commissions of the real estate transaction. There are times when the buyer and the seller agree to split the burden of paying the commission. They’re free to agree on this should they want to stipulate it in their contract and include it in their sale agreement.
But the more widespread practice is that the seller simply adds the commission on top of the selling price. In a way, buyers end up paying for the commission when they pay for the whole selling price. This percentage commission doesn’t really go directly to the real estate agent but to the real estate broker under whom the agent transacts with buyers and sellers. It’s the broker who then pays out the commission of the real estate agent.
The broker’s commission is expressly stated in the listing agreement when you have your house for sale listed. This is a legal and binding contract between the seller of the property and the broker. This agreement contains all the terms and conditions between the seller and the broker, as well as the listing owner if the broker doesn’t own the listing site.
The share of the real estate agent in the commissions will be taken from their sponsoring broker’s commission. The reason for this is that in Australia, it’s the seller who has license to broker real estate transactions. Real estate agents just work under the supervision of the real estate broker and can’t legally close real estate transactions on their own without the license of the broker.
The typical sharing between the agent and their sponsoring broker is 50-50, but they’re free to go into any other kind of sharing that they’d agree on.
How They Share Commissions
The transaction commissions paid out by the property owner or seller will be divided among several people who took part to negotiate and close the transaction. The typical transaction will have the commission shared among four persons:
- The Listing Agent. This is the agent who signed up the seller’s property to be listed on their listing site.
- The Listing Broker. This is the broker who supervises the listing agent. Sometimes, the broker also owns the listing site, sometimes they don’t.
- Buyer’s Agent. This is the agent hired by the buyer to negotiate on their behalf and conduct the due diligence.
- Broker Of The Buyer’s Agent. This is the broker who supervises the work of the agent who signed up the buyer as a client.
To give you an example, a house listed for AUSD$300,000 would earn a 6% commission of AUSD$18,000 when it’s successfully sold and closed by the agent. But this amount wouldn’t be paid out straight to the listing agent. This amount would be split between the listing agent, the listing broker, the buyer’s agent, and the buyer’s broker. The typical sharing is 50% for the seller side and 50% for the buyer side.
This means that the seller side of the transaction would get AUSD$9,000 in commissions and the buyer side would get the other half of AUSD$9,000 of commissions. Out of their share of AUSD$9,000, the listing agent and listing seller can share it 50-50.
In practice, however, it’s more common for the listing agent to get paid 60% while the listing broker gets the remaining 40%. In this example, the listing agent would receive AUSD$5,400. Maybe a little less over this after the administrative and other transaction charges are deducted by the listing broker.
The real estate agent typically gets their commission from the property owner or seller if the listing is successfully sold. It’s the property owner or seller who pays out the commission. The usual range of this commission is somewhere between 4 to 6% of the closing or final sale price, but this goes to the listing broker. The commission is then shared among the listing broker, the listing agent, the buyer’s agent, and the broker of the buyer’s agent.