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Selling agent fees

Discussion in 'The Buying & Selling Process' started by Burramys, 15th Sep, 2015.

  1. Burramys

    Burramys Well-Known Member

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    I'm hoping to sell an IP and seek advice about this. Being a long-term invetsor my last sale was about eight years ago and I have lost track of the market.

    The REA rates are coming in at about 2.2% including GST and not including marketing, which is cited as about $5000. I'm at a loss to see how $5000 can be spent, and suspect that the REAs are getting kickbacks. I'm happy with 12 weeks on a website and some flyers, costing about $1000 in total for both. One agent has offered to go down to 1.5% plus a percentage over my reserve. He still wants to spend $5000 on marketing. They're all keen on an auction and reject my wish for private sale. I like a private sale as the bidders do not know what the other bidders - if any - are offering.

    For variety, a Jenman company is asking 3% including advertising, with nothing paid unless a certain level is reached. This 3% is about $5000 less net to me than the other offers - if they sell at the reserve.

    So I might be spending $1-5000 on marketing for a possible sale that might give me $5000 more or paying 3% to obtain $5000 less, if it sells.

    Can someone please advise me if any of the above stand out as desirable or not? Also, is marketing on one website advisable, and if so, which one? TIA.
     
  2. Big Will

    Big Will Well-Known Member

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    depends on your price point of your property but 2.2 inc GST is about standard rate for 500k ish properties when you get up to 1M then you sort of start to see a reduction in rate.

    $5,000 is about right for marketing, professional photos, website listing (with premium spots), floor plans, copywriting etc.

    I find it amusing that the Jenman company wanting to keep with auction as it is one of their big thing they dislike, Neil even wrote a whole chapter about how auctions do not give you the best price.

    With the Jenman group you need to understand they don't charge for the advertising but you do pay for it anyway in the end (plus others who didn't sell). They usually are a cheaper marketing package which means you are paying more for less.

    With the upfront ones you are making the shots on what you want and not want. Look at what is in the package and make sure you have premium listings on the internet as there is nothing worse then being on page 3 on the first day as you didn't pay enough.

    See this

    http://ffx.adcentre.com.au/trademar...3/DM1304201_ProductEffectivenessBRA_HR_nc.pdf

    It is likely Jenman will have you on a standard or elite place however if you are paying upfront you can call where you want your ad to be and they can all offer the different ranks besides 'top spot'.

    Top spot is sold as an exclusive right but sometimes an agency wont pay for 100% so they go 50/50 with another agency (but rare). The agency needs to pay for this per suburb and would be also built back into your marketing package.

    RE.com also has the same tiered system but they use different names.

    TLDR - Choose the agent that you feel you have the best connection with and look closer at the marketing package (as you really gave us no details besides cost). I would be hesitant with the Jenman person purely because they will make the calls on what marketing they are going to pay for it eventually you may as well have a say on what you pay for.
     
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  3. Burramys

    Burramys Well-Known Member

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    Big Will, thanks. I was unaware of the Domain figures. Not one agent bothered to explain this to me! The property should sell for about $800,000, so there may be a commission reduction, as one agent has already done. No movement from Jenman. Being unable to control the marketing is not to my to my liking. While I don't mind paying a fair amount, many of the time and costs are fixed regardless if a property sells for a low or high figure.

    Clarification. The Jenman REA made no comment about auction or the sale method, so I suspect that they are still working with private sale and buyer's highest price. It was the other REAs that wanted auctions. Is it reasonable for a vendor to request a certain way of selling? I like private sales for the Jenman reasons, notably BHP.

    I'm now persuaded that spending more than I anticipated is good value for money, and will hopefully be recouped in a faster sale, higher price or both.

    I'm surprised that brochures are still used when so much is online. I guess that four colour process 120 gsm glossy art sells better than pixels.
     
  4. Perthguy

    Perthguy Well-Known Member

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    @Burramys, I have just got sales packs from 5 agents in Melbourne to sell my property. Agents are quoting a sale price of $660k - $850k but the real number is likely around $750k for comparison to yours.

    I have contacted 6 agents and they all recommend auction. In a hot market, I agree. Definitely auction.

    In terms of marketing, there is a listing package which gets you onto 10 internet sites, 'Premiere Listing' on realestate.com.au, 'Premium Plus Listing' on domain.com.au and reviewproperty.com.au and other marketing. Cost for this should be around $2,850. Then there are extras like pro-photos, floor plans, photo board and brochures. These should range from an additional $800 to $1,000. Most advertising packs include newspaper advertising, so the first pack is $6,343 Inc GST. But if you take out newspaper advertising, that drops back to $4,208. Still a little high. Personally, I don't see any need to spend more than $4k on marketing. Tell the agent that is your budget if you want! ;)

    In terms of commission for Auction, I have been quoted 1.5% to 2% max depending on the agency. Personally, I think 2.2% is a little on the high side, but remember agent fees are negotiable.

    I added up the commission and marketing cost of each agent at a sale price of $750k and a sale price of $800k. At $800k, the difference in total fees (commission + marketing) is $4.5k. I consider this trivial, considering that is basically one bid at a good auction.

    I won't be making my decision based on cost because they are all basically the same. I will try to pick the agent who I think will get the best price.

    Anyway, how is this for a commission offer:
    option 1: 1.8% of the total sale price ( inc. GST )
    option 2: 1.65% of the total sale price ( inc. GST ) up to $750k ( as an example ) and 10% of every dollar thereafter e.g. if sold at $780k the total commission would be $15,375 ( inc. GST )
    option 3: 1.6% of the total sale price ( inc. GST ) up to $730k ( as an example ), 1.8% of the total sale price ( inc. GST ) if sold above $730k ( as an example ) up to 760k, 2% of the total sale price ( inc. GST ) if sold above $760k up to $790k ( as an example ), 2.2% of the total sale price ( inc. GST ) if sold above $790k ( as an example )
    option 4: 1.7% of the total sale price ( inc. GST ) up to $730k ( as an example ), 10% ( inc. GST ) of every dollar between $730k - $770k ( as an example ) and 20% of every dollar achieved above $770k
    option 5: 1.5 – 2.2% of the total sale price ( inc. GST ) at your discretion upon the point of sale
    "We are prepared to work on any structure that you’d prefer and only want to give you options to demonstrate we’re flexible. "

    I have never seen anything like it! :eek::)
     
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  5. Burramys

    Burramys Well-Known Member

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    Perthguy, thanks. I approached about eight REAs and got four responses, including one from my PM. Jenman and the PM are too high, and one was difficult (said that I was asking a commission that was too low - never did). That leaves one, who has a similar structure to options 2, 3 and 4 above. Apart from Jenman all suggest auctions, and you have now tipped me down that path. It's curious that the jenman buyer's highest price falls apart in a good market.

    I can specify a budget (never occurred to me!) and don't need newspaper advertising. Your comment about the $4,500 difference is astute, essentially background noise or error bars, again something I had not thought of. With my last property sale in about 2006 I'm quite out of touch. The sale process that is, but maybe also reality.
     
  6. jim1964

    jim1964 Well-Known Member Premium Member

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  7. Perthguy

    Perthguy Well-Known Member

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    Naa. I will just tell him I am going with this option:
    option 5: 1.5 – 2.2% of the total sale price ( inc. GST ) at your discretion upon the point of sale

    Hehe. At the end he will have earned 1.5% ;)
     
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  8. Perthguy

    Perthguy Well-Known Member

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    No worries. I haven't sold in Melbourne before, so it's all new to me. I sat down looking at all the info thinking gee, that commission is low or wow, that commission is high. But yeah, once you add it all up, it really doesn't make any difference. I reckon a good auctioneer could get you $10k or $15k more than a bad auctioneer with the same crowd, so that $4.5k looks like nothing. :)
     
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  9. Esh

    Esh Well-Known Member

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    I think it's a good thing if buyers see what other buyers are offering. I meet so many people that lost out on a private through private sale for about $1,00-$10,000 and if they knew of the higher offer they would have paid for it. Even in a hot market buyers will still offer but less than what they are prepared to pay. We would too so it totally makes sense.

    In regards to marketing. You need to ask the agents if they are making money from the marketing. There is a clause in the Sales Agreement that they to tick off if they are getting rebates etc from marketing.

    Marketing costs will also vary from state to state and also agency to agency (even if they are on the same street) it depends on the deal the agency had with domain and re. Marketing. If you pay insurance on your car, why wouldn't you want to pay marketing on your greatest asset. Product placement is the best thing you can do for your property along with presenting it right. You want to be on the top of the page on both re and domain. Just remember your property is in competition with other properties not in isolation
     
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  10. Perthguy

    Perthguy Well-Known Member

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    I don't mind spending an appropriate amount on a targeted marketing campaign. But dropping $2k on newspaper advertising for my property is just stupid IMO. The buyer of my property will not find my property from a newspaper ad. The marketing package I am purchasing includes premium listings on the major internet sites. That worth far more than any newspaper ad. :)
     
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  11. Big Will

    Big Will Well-Known Member

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    If it was an older generation you were targeting then you would need the newspaper advertising. Like my grandma she doesn't have a computer let alone know how to operate one.

    Yes her children would help her out and would look online however if it was in the local RE newspaper she could see it and like it rather than her children saying no and not seeing it.

    Paper is also good for finding buyers who are looking in a more affluent area than yours and attracting them to yours as they might not have considered your suburb but love the house and willing to move just that little further out to get your house.
     
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  12. Big Will

    Big Will Well-Known Member

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    I used to work as a REA and would explain the marketing package in full, as I would want to know exactly where my $$$ were and why and then I can make a call or just the REA judgment.

    Sorry I thought the Jenman one were also going down path of auction and found it weird. Like others have said I have had experience where buyers said they would of paid more if they had known what the other offer was but also had times where I had gotten about 10% more than (50k~) more than the next closest offer, which wouldn't of happened at auction.

    I think in a increasing market the auction will be better as the buyers can see what each other are bidding however in a slower market the private sale would do better as you don't want buyers to know what each other are bidding.

    All your decision though :)
     
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  13. Perthguy

    Perthguy Well-Known Member

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    This is true but neither group are my demographic. My house is a knock down job on a potential development site. It will take targeted advertising to reach the right audience for this property. Not newspaper ads. That's why I think it is important to understand your product and your market and tailer a marketing campaign to suit your product. Throwing large amounts of cash into a generic marketing campaign is wasteful IMO.
     
  14. Be Developer

    Be Developer Property Developer Business Member

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    @Perthguy And @Esh

    Some of the proposed marketing, especially print media is for agency and agnet itself.

    Most sales/leads are generated by RE, Domain and agnet/agency's own network.

    IMHO,

    RE/Domain and other websites $1500-$2000
    Pro photos -$200-$300
    Board - $300-$400
    brochures- $300
    Auction fee and prep - $400

    And 1.5% (Inc GST) is appropriate pricing for Melbourne market.


    Print media may work for

    Over 55 properties
    Larger development
    Small villa/apartments
    Commercial/large development sites.
     
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  15. Burramys

    Burramys Well-Known Member

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    The property is a flat, quite big for the number of rooms. I'll pay what is necessary for online marketing but don't want to spend on websites that have a reduced chance of a sale. Domain and RE.com, maybe RE view seem to be where most people look. Is there any advantage in having more online presence? BE Developer cites about $3500 for marketing, seems okay. As I'm paying for the pictures, does copyright rest with me? I can see a REA getting pictures for a sale and then using them again 5-10 years later if nothing has changed. Much marketing is about the REA COMPANY with the property not quite so prominent.
     
  16. Bayview

    Bayview Well-Known Member

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    We just sold our PPoR for $1.38m...you would probably think a few dollars need to be spent on ads for a property in this price range?

    We had an internet listing, some flyers and a basic board on the front boundary, and the photo in the window, professional photos for the flyers and internet.

    Anything more than that is a waste of your money.

    Don't be sucked in.
     
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  17. Big Will

    Big Will Well-Known Member

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    The copyright remains with the photographer it is his work, you have just paid him to use their photos.

    Also so what if they use the photos in 5 years time... it is highly unlikely as the house would change but also compare professional photos from 5 years ago to todays. Also it is $100 for photos in the $750,000. Also if you no longer live there so why would it matter?

    Take your own photos if you really want to it is your call, but I would think you would attract more people with professional photos.

    Stop listening to the Jenman guys, yes it is branded with the REA company name but that attracted you to call them before but it is also going to attract buyers to their office about properties.

    I.e. if there are 10 properties on the market and 5 properties are with 5 agency and the other 5 properties are with one agency which agency would a buyer call about the type (not actual) of property they are interested in (e.g. 3bed, 2bath). They will call the agency with 5 properties 99% of the time and might call one or two of the others.

    Also properties listed with an agency buyers tend to feel the price is usually more in line with market value and more comfortable about inspecting as there is a disconnect between the buyer and the vendor. Compared with For Sale by Owner (FSbO) where buyers feel introsvie and/or the vendor probably has unrealistic expectations on it. I have seen FSbO listed 100-200k more than where they should be in the 500k price range.
     
  18. Burramys

    Burramys Well-Known Member

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    Bayview, by conducting DD here I hope not to be sucked in. Good basic mrketing is all I'm after, value for money.

    Big Will, I was hoping to be able to use the pictures later. No matter, I can take some of my own. I've moved away from Jenman. The rates are too high and everyone else is saying auction, which leaves the Jenman Buyer's Highest Price where? I can a number of things, but selling property is outside my skills. Delegating to a REA is sensible. Asking $100,000+ more than fair value of $500,000, ouch.

    I've got most of the responses (one agent declined to respond, referring to a vague "we have given our rate" and EPR - did not) so I think the REA is appointed, partly by default. Seems okay.
     
  19. Burramys

    Burramys Well-Known Member

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    Thanks to your excellent advice I now have a selling REA. of the others that did not get the job:
    * one did not provide rates, just gave a vague "it's in the last email", date not cited; and
    * one had marketing of over $8000. Merde.
    Jenman was $2800-3800 more expensive than the final REA, allowing $5000 for the appointed REA marketing.

    The appointed REA has suggested that there be advertising on eight websites and Domain premium plus zone one, another $1485, making $3400 in total for websites. Seems too high to me for a sale of circa $800,000. A video is included on the list, another $250. The pricing is over a year old, so this datedness may be used as a reason to increase the figures. Not too keen on that.
     
  20. Burramys

    Burramys Well-Known Member

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    The REA suggests the following:
    Allhomes.com.au
    Domain.com
    Juwai.com
    Property.com
    Realestate.com with premiere property
    Realestate.view
    Reviewproperty.com
    Thehomepage.com.au
    Total cost $2950, which seems too high. Is it? As I said I'm happy to pay what is necessary to sell, but want value for money, so knocking out some of the above may be indicated.

    There's another website, free:
    http://blog.housenet.com.au/a new way to advertise your property real estate listings that are awesome social free/
    Any comments?