Why Queensland Estate Agents Don’t Give Discounts

[Author – Tim ODwyer]

Will the apparent upturn in Queensland housing prices mean discounted real estate commission rates? Will agents charge sellers less as homes are reportedly sold within days, if not hours, of going on the market? The answer is no – to both questions.

None of these in Queensland! Residential agents’ commission rates, unlike property prices, have never been affected by the so-called “market”. Agents will not offer discounts to sellers if sales prove easier, or occur faster. Whatever the climate, agents occasionally make quick, easy and non-discounted commissions when properties are sold to next-door or nearby neighbours. It’s the same result if an agent sells a rental property to the owner’s tenant. For this reason, before putting properties on the market with an agent, sellers should always talk to their neighbours or tenants. Solicitors’ fees for preparing private sales contracts are miniscule compared with agents’ commissions.

Sellers about to list for sale will find agents’ listing agreements include this legally-required advice: “Please note you have a right to negotiate an amount lower than this amount of commission.” An earlier mandatory advice reminds residential sellers that the Property Agents and Motor Dealers Regulation 2001 sets a maximum commission chargeable by the agent. Unfortunately the Beattie government neglected to specify in its prescribed form that this maximum commission, if the sale price is more than $18,000.00, is $900.00 plus “2.5% of the part of the price that is more than $18,000”. At today’s housing prices this means huge commissions payable by sellers, but built into every buyer’s purchase price.

Sellers who try to negotiate with agents soon discover that commission is non-negotiable below the regulated maximum. Few sellers try to haggle agents’ fees down anyhow. Even fewer succeed because price competition is non-existent within the residential real estate industry which is a monopoly more than a cartel. While some agents misrepresent the commission rate as fixed by the Real Estate Institute of Queensland, all agents treat this regulated two-part rate as an unmoveable benchmark. But I tell a lie.

Only very rarely, and at the point of sale rather than at listing, some agents will reluctantly consider a commission reduction. This is when a buyer is found, the parties negotiate back and forth on price then reach an impasse. To convince a seller to drop the price to meet a buyer’s best offer, it has been known (not too often, mind) for an agent to snip a little off the commission. By the way, don’t hold your breath waiting for an agent to offer a discount for an unexpectedly higher sale price. No commission cuts either when your buyer’s finance is being arranged through the agency’s mortgage broking division. Never mind the consequent kickbacks to the agency from the brokers.

Consumer advocate Neil Jenman, although a constant critic of many real estate practices, has long defended an agent’s entitlement to full commission on a quick sale. If you list in the morning and sell in the afternoon, Jenman says you can’t complain. You did not endure weeks of inspections, open houses and other marketing activities. “The agent has done you a favour and deserves top dollar for speedily selling your property at an acceptable price,” he says, but agrees that a cut in commission should be in order when the agent sells a rental property to the tenants.

The law has long regarded agents’ success or failure in securing sales as the sole criterion for their remuneration.

A High Court judge once explained how commission rates reflected this state of affairs:

“Rightly or wrongly, the law … has made the earning of an agreed commission an all or nothing affair, on the one hand denying agents (with no sale) any reward despite substantial labour on their part, and on the other hand handsomely rewarding agents who with little effort manage to effect a sale.”

(This article first ran in THE COURIER MAIL)

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