What exactly is the Cheapest Real Estate Agent?

So, what exactly is the cheapest real estate agent? Selling your home can be daunting. For most, it is the highest valued asset they own, and with that comes the stress of engaging the right person to ensure the best possible return. We understand selling your home shouldn’t all be about the money, but let’s be honest, that is a huge part of it.

It is, therefore, no surprise costs and commission come into every discussion. This tends to unveil two keys questions that seem to be on every homeowner’s mind – who is the cheapest agent and does expensive equal quality?

The great news is we can answer both those questions quite easily. But first lets better clarify the questions. What we believe the homeowners mean is how do I get the best return for my home, because it is the final amount in your pocket that really matters. Please don’t get caught into the trap of asking who has the lowest commission – that is only part of the equation and not looking at the whole picture can be quite detrimental.

Let’s Calculate the cheapest agent

The formula you should use it this: Sale Price Achieved (gross) – costs (commission, marketing costs, etc) = final dollars in your pocket (net). Let me give two examples to help illustrate what we mean.

Agent A charges 1% commission and charges no marketing costs – cheap right? But let’s look at this Agents results. The reality is to attract a top dollar for your home you need to present like a top dollar product. The agent doesn’t charge marketing as they use their phone for photos, do the most basic of marketing (or next to none) and the result is poor. Your home looks terrible, the agent has not cast a wide net so potential buyers are very limited and so the home will now tend to attract only price motivated buyers – not what you want. The home sells for $550,000 after some time, desperate to attract any interest.  

Agent B charges 3% commission and charges $2,000 marketing costs. A lot more right? But this agent knows what they are doing and in effect are preparing your home to be able to place it in the best position to attract a large range of emotive buyers who pay the most. This Agent has created the perception of a top dollar product and therefore attracts a top dollar for your home. The home sells for $595,000.

Now let’s use the formula: Sale Price Achieved – costs = final dollars in your pocket

Agent A : $550,000  – $6,050 (incl GST)  = $543,950 (what you keep)
Agent B : $595,000 – ($19,635 (incl GST) + $2,000) =  $573,365 (what you keep)

The difference between the cheapest agent and expensive

Big difference right, almost $30,000 – image what you could do with that! So again, who was the most expensive agent? Now you can see it is Agent A of course. That cheap commission and low or no costs meant a poor return. The final figure is what matters. You need to look deeper.

Some people may say not all agents who charge more are better – and they are absolutely right. But the formula still applies. The trick is you, as the potential seller, need to do your homework. You need to research your prospective agents and see what their actual results are.

You should not just accept the few ‘great results’ the agent promotes – like references, they are not going to promote the poor ones. Look at ALL their sales. Do they get lucky on a few or are they consistently performing?

Look into third-party sites that are less controlled by the agent. For example, realestate.com.au will list all the sales of the agent over the last 12 months (good or bad). And if some agents don’t list the final price, I guess you have to ask why?

Also please keep everything into perspective. When you are comparing the homes and their final sales, compare the results of apples to apples. Does the condition of the home, location, size etc compare?   

You will pretty quickly see who the consistent performer is, and who isn’t. Yes, it takes time and effort on your behalf but then again, is that not worth it for the potential difference it can cost you or make you?

Written by Shawn Kristofer

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