“Joe, I know you can sell my house for big bucks, but how much of that is actually going to end up in my pocket? How much money can I keep when I sell my home?” 

The real estate process can be a bit confusing. It is not the most transparent transaction, and that’s why our mob here at Sydney Listings wanted to unpack for you very clearly how much you get left with when you sell. 

We’re going to talk about 5 big costs or factors that come out of that final sales price, and then you can go and easily run your own numbers to understand what you’re going to be left over with once you cash in!

Agents & Marketing Costs

This is the big and obvious one. The real estate industry in Sydney is still dominated by a commission model.

So, an agent will charge on average 2% + GST of your final sale price. Some agents charge up to 3%. 

So if you were selling a $1 million property the average agent’s fee would be $20,000 + GST. 

BUT this is not the full picture because in Australia marketing expenses to the seller are charged separately to and on top of commission.

Marketing expenses include:

• Brochures
• Photography
• Signboards
• Video
• Advertising on listing portals like realestate.com.au and domain.com.au
• and more… 

How much is this? Well in some areas it can be as low as $4-5,000, and in premium suburbs it can be up to $25-30,000.

Don’t have a heart attack just yet! Use an average range of $4-7,000 for now for a ‘run-of-the-mill’ property sale. So you’re looking at $27,000 in agent and marketing fees on a $1 million property. 

There’s currently $973,000 sitting in your pocket if you use a traditional agent. 

Reducing Selling Costs in order to keep more money when you sell your home

Now if you’ve seen our wacky “ARREST THE AGENT” campaigns you know that there are alternatives out there. Agents at Sydney Listings are currently able to sell homes for $9,999 in any area without compromising on service. 

(Bloody impressive isn’t it).

Now obviously I recommend this but I’m not exactly impartial. There is innovation happening in real estate and there will be benefits passed on to customers as a result. 

As always, whether you go with the old fee model or an updated one like ours you need to be comfortable that you’re getting a good service. If you need to know more about our solution, there’s details here. 

But now let’s get back to your pocket. With a modern agent you could actually have $990,001 left in your pocket, rather than $973,000. 

“Thanks Joe” you’re all saying. 

Legal Costs

Often overlooked but in Australia legal professionals are an important part of the sales process. 

To organise the property to be sold you will need conveyancing done – this is the legal work required in creating the contract, mortgage and other important documents for the sale. 

In other words, all the BORING stuff so that us agents don’t have to do it!

If you’ll take another Sydney Listings tip, we recommend you always use a SOLICITOR who does conveyancing rather than just a stand-alone CONVEYANCER even though it is slightly more expensive. 

The reason is that if there is legal trouble, the solicitor will be able to advise you and handle matters whereas the conveyancer will not. 

Allow around $1,650 plus disbursements for a good conveyancer. 

In your pocket at this point: $988,000 vs. $971,000 from that $1 million sales price. 

Mortgage

Most of you will have a mortgage to pay out on your property and so you will need to clear any outstanding debt with the proceeds of the sale. 

Your lender will get cross with you and put you in the naughty corner if they don’t get their money. So the lender ensures that they get paid first before you settle. 

So if you have $600,000 of debt outstanding on your property sold for $1 million, you’ll have somewhere between $388,000 and $371,000 in cash left over. 

Now this REA article paints a clear picture about implications with your mortgage. If the value of your property has gone down or is less than the outstanding debt, you may be in the dangerous region called negative equity.

For example, if the debt owing was $1.2 million, and you sold for $1 million…  well you don’t need to be a mathematician (though if you’re not, you’re $200,000 short) to know the bank will not be happy. 

In this instance, the lender will actually take steps to recover their debts before allowing the settlement to go through. 

The other time a lender can get involved in holding up your settlement is if you’ve cross-collateralised two loans together. You don’t need to know about that right now as it’s getting complicated but if this affects you, you can learn more here.

Capital Gains Tax.

Capital Gains Tax is the tricky one out of this bunch. Most people will factor in the direct costs from the agent and the mortgage owing but neglect Capital Gains Tax (othewise known as CGT). 

Whilst we refer to CGT you don’t actually pay it separately, you just pay it as part of your normal tax. That is, it is considered alongside the rest of your income. So keep that in mind, it is dependent on your overall position. 

To help explain it for Australia I thought this was the clearest video online for you visual learners: although it uses a shares example. 

The simplest and clearest blog article I believe for you is this one from HR Block !

Capital Gains Tax (CGT) applies more to investors than owner-occupiers. 

You are actually exempt from CGT in Australia under the following conditions: 

• The property was purchased before 1985 (as this is when the legislation was introduced)
• The property is your Principal Place of Residence, and not a pure investment property

We then get into another headache about whether a property qualifies as a principle place of residence or not. I was trying to help a friend figure out if they were exempt recently – you should see how much time and research they put into this rabbit hole!

Gee tax is fun!

It may not be necessary to open this whole essay here, but in short: 

• There is not absolute clarity from the ATO on the criteria for a principal place of residence (PPR for short)
• You can only have one PPR, unless you sell and start the process again. 
• There are extra implications if you have lived overseas in this time … see here
• Just because a property collects rent doesn’t mean it can’t qualify as your PPR, as long as you lived in it for a period (although this period is somewhat vague)
• The HR Block Blog suggests you can still claim exemption for a property if you relocate due to medical or disability reasons to a care facility instead of living there. 
• CGT is higher if the asset is sold within 1 year. 

How do I figure out what my CGT amount is?

The obvious answer to this question “How do I figure out what my CGT amount is?” would be to “ask your accountant”. 

BUT if interested, Michael Yardeny from Property Update outlines three methods and they are based on timing and circumstances of the sale. 

There are also calculators you can use online to get a rough indication of CGT but remember that this is not as precise as using an accountant. 

Using this calculator, an example of a property bought for $875,000 which is sold 2 years later for $1 million, by an investor earning a $90,000 a year salary with no other income would be approximately $24,375. But if sold within 12 months, the CGT payable is estimated to be more than double at $51,550. 

Big difference there of $27,175. 

Say we’re using the 2 year example, there’s now either $363,700 or $346,700 remaining, again depending on that agent choice. 

The total non-mortgage costs of exiting the property so far are $36,000 vs. $52,950 for the example we used. Just note that these will constantly change based on the situation! 

Timing and Mistakes 

Don’t forget that the market value changes over time, going up and down and may be different from when you start looking to sell from when you eventually get on the market. 

Don’t be surprised if the scenario is very different within 4-6 months! Which is why you should regularly appraise the property with agents as well as through self-education ever 6 months when you’re thinking of selling. 

If you need more advice on how to time the right point sell, go here. 

Also, using the wrong professionals, be they accountants, agents, solicitors or mortgage brokers can cost you more. Being strategic about the sale and getting the right professionals around you can help you maximise how much money you keep when selling. 

What will the cost be if your loans are set up incorrectly and your lender won’t release the security? 

What will the cost be if your accountant cannot claim exemptions from CGT? 

What will the cost be if there is a mistake in your contract of sale? 

Could the wrong agent cost you up to $80,000 just because they’re not a skilled negotiator? 

Good Luck and don’t forget to share this article with people who might find it useful!

So why do agents get paid so much commission?

It’s a question sellers have been asking for some time now. Regardless of whether you’re in Europe, the USA or Australia and we’re going to expose the biggest reasons for this model right now.

Commission was the best available fee structure for selling a home under the previous era of ‘traditional real estate’. But technology and the digital age mean that this is no longer the best structure available.

Why do agents get paid so much commission?

So here are FIVE reasons why.

1) Expensive, inefficient and complicated businesses

Traditional real estate businesses were set up in local franchises. They normally had a retail shop-front in every suburb, with a franchisee running the office.

Each office had its own rent and receptionist. These were times when local agents had more knowledge on the market, and it was hard to know what was available for sale or what a home was worth without an agent.

To service demand, agents in the office would go out and list properties for sale, and then get paid commission for a successful sale. In Australia this hovers around 2.2%-3.3% of the property’s sale price.

In the USA there is a different model in place where commission can be up to 6% but marketing is included, not charged separately.

But out of that fee a large portion would get paid to the franchisee, who then had to pay his admin staff, his rent, other expenses and marketing costs. Finally he had to pay the franchisor or ‘head office’.

Before the digital revolution, there wasn’t a more efficient way, so this was the best agencies could afford to charge. But as we’ll show beyond doubt, this has all changed.

Sellers do not benefit from having an agent with too many overheads, rents, admin staff and franchise fees to pay. So this is no longer a justification to be paying commission.

2) Agents waste their time

If you want a window into traditional real estate culture tune into a real estate seminar. 95% of what real estate trainers teach is how to ‘win more listings’.

Real estate is overly competitive and as a result agents focus on one thing… ‘Listing’ properties for sale. No effort goes into customer service and getting better at selling for clients.

There is almost no effort in training put into showing agents how to get more eyeballs on a property or achieve higher sales prices.

Especially in Australia.

Agents waste their time being too similar to each other, which focuses their attention on competing against each other rather than serving clients and chasing buyers.

Agents only have so much time in a day, yet they are encouraged to spend 3 hours everyday ‘prospecting’ for new ‘leads’ to convert into listings.

Then they have to book in appointments to give presentations… so there goes another 1-3 hours. If up to 6 hours is spent ‘prospecting’ then where is the time to convert those listings into actual sales?

The truth is agents need to charge the commission they do given the low amount of properties they can sell a year by using their time in this ineffective way.

3) Agents have their time wasted

The traditional agent is not all to blame. In truth they are hardly to blame at all, because they go into an outdated industry that does not set them up to succeed.

Whilst real estate looks simple from the outside, there are hard-working agents who simply have their time wasted. How you ask? Let’s start with who they have to communicate with:

• Sellers and Vendors: A good agent will have several of these to liase with at one time, and provide updates several times a week
• Multiple prospective buyers for each listed property: chasing calls that don’t answer first time, email enquiries, and scheduling inspections, following them up for feedback
• Related parties to facilitate and close a deal: From photographers, signboard companies and admin staff to mortgage brokers, solicitors and accountants
• Other members of their own team

Then on top of all this they will have to facilitate:

• Countless listing presentations that choose another agent and waste 1-2 hours of meeting time and likely hours of preparation
• Building & pest inspections as well as other inspections for the property that prove trivial
• Driving around contracts and paperwork to be signed by multiple parties
• Chasing up payments

4) Lack of technological uptake

The Franchise business model was the best for its time but its structure was not set up to update over time. This is one of the biggest reasons why agents get paid so much commission.

Each big brand office in your area is essentially a separate business run by a franchisee. As such it is hard to roll-out changes that every office in a network will agree with.

It also means that these fragmented offices are unwilling to come together to centralise their overheads and cut down the extra expenses.

FACT: Technology and social media can help agents get more eyeballs on property campaigns in this era and sell properties faster.

FACT: Technology can cut out time spent on most manual processes described above, and this will only improve over time as the buying and selling process becomes more digital and online.

There is strong evidence that great results can be achieved without the expensive rents and admin staff as you’ll see here.

https://www.youtube.com/watch?v=mbI46lsRBfM&t=112s

Yet real estate agents are not traditionally required to have digital skills. This is why they have become so vulnerable, along with their commission-based structure for payment.

5) Traditional Agents who cut fees under-performed

Traditional real estate agents who lowered their commission to get listings did not perform well. It’s clear to see why from the above.

By lowering fee but not making any structural changes to the manual processes, time wasted and business set-ups, all agents did was cut margins.

Whilst that gets a few more listings, it does not streamline things and merely creates more work for the desperate agent. That’s why the cut-fee approach is not a good one for sellers.

If it was, we would have seen a steady decline in commission rates over time internationally. But we haven’t. Instead, established agents are still able to charge high commissions.

Digital Real Estate

So that will likely answer the question “why do agents get paid so much commission?”. Rather than the expert knowledge agents have or their work ethic, the reasons are largely structural.

That’s why structural changes in a digital real estate model are the solution to lowering the fee required to do a good job. There is no point saving $15,000 on fees when the property sells for $50,000 less.

The digital age of real estate instead works to streamline the entire process. It works to get that high sales price. But by cutting out the time, waste and expenses, it passes on more savings.

How do you market your property when selling in our digital era? The traditional sales and marketing process in real estate has evolved dramatically. Instead of relying on local agents and shop windows, we now have major listing portals like realestate.com.au and domain.com.au in Australia.

Why is marketing your property important?

Need more tips and insights?

Marketing is an investment in yourself. It’s not a cost or reliability so you need to maximize the exposure, catching all the potential buyers for your marketplace.

The more you spend on marketing, the greater the chance of finding that perfect buyer who will pay a premium price.

Buyer Competition

Marketing should be there to create buyer competition, so that multiple offers come in and you can work with those offers to secure the very best price for your property. This principle has always been important in real estate, and sales in general.

Modern Real Estate Agents and Marketing

Few agents in this day and age demonstrate an understanding of modern marketing. We see so many agents only list properties on two major portals. This is because it is all they know how to do, apart from offering print advertising.

Social Media, Digital Marketing and the rise of Video have been more recent developments, and most agents are finding it difficult to fully take advantage of these mediums.

For instance, many agents will not understand how to use Facebook and Instagram differently to realestate.com.au and domain.com.au. This comes into the difference between warm and cold traffic.

Warm and Cold Traffic

Let’s use the example of realestate.com.au vs. Facebook to market your property when selling.

When people go onto realestate.com.au, they are hot traffic. They are looking to learn more about prices, see what is on the market, and check out options to buy.

People don’t go into Facebook to make purchasing decisions. They are more of a cold audience. They are on there to make a post, check notifications, see photos of people. We advertise to people on Facebook by creating content that they are looking for here, and then distract them.

So these ads are designed differently to have full effect. Mediums like Facebook, Instagram and Youtube can also be very targeted. They can target people based on area, and interest.

The crazy world of targeting, re-targeting, look-alike audiences and cost per impression is far and beyond traditional agents. The same can be said for real estate property videos. The industry’s future is going to be extremely digital and geared towards a new generation who understand these platforms.

Feel free to hang out with us on social media or subscribe for more tips and insights!

Should you use a property video to sell your home? Is it worth the money or not? Well why don’t you check out a video right now to explore this hot topic! See below…

More tips and insights?

Video consumption is increasing every year online and it is favored by all major social media platforms. Whether it be Youtube, LinkedIn, Facebook or Instagram, video is certainly on the rise.

If you’re using an agent who truly knows how to market a property you should definitely be using a property video. This content can be distributed amongst multiple platforms and create an engaging way to show the value of your property.

The value of Property Videos

This Hubspot article highlights the value of video in modern marketing. The main takeaways are that:

• More than 50% of consumers want to see videos from brands… more than any other type of content
• On marketing landing pages, video can increase conversions by over 80%.

So the question is, why would you not include a growing medium, demanded by consumers, in the marketing of your property?

With some real estate video campaigns going viral and earning views in the thousands, this content can create the edge in a campaign. Video creates intimacy and familiarity before prospects have even seen a home. So it can not only be valuable, but invaluable to ramping up demand for your property.

Choosing the right agent for a real estate transaction can be the difference of $10,000’s or $100,000’s.

This can appear difficult in a marketplace saturated with options, however we’ve provided 6 no-nonsense tips to look out for. What you’ll find is few agents possess all of these especially not Number 5!

How to select the right real estate agent

1) The perfect sales process

Selling a home may from the outside look like an easy process. An agent puts a few pictures online, shows up on Saturday and then gives a contract to the highest bidder.

The reality however is completely different. There is so much involved in the sale of a home, including but not limited to:

• Pricing the property
• Tailoring a marketing strategy for the property
• Preparing photography, copy, documents and other advertising material in order to put the property on the market
• Handling enquiries diligently
• Monitoring campaigns and feedback
• Alerting off-line contacts about the property
• Following up buyers and negotiating

Therefore, a great agent will have robust systems in place, as well as a clear and detailed sales process that guarantees the best price will be achieved.

2) The right track record

When choosing the right agent, looking at their track record often provides a very useful insight.

Look at factors like the volume of transactions they work on, feedback from other clients and the prices they achieve.

This will provide an insight into the traffic they can direct towards your property as well as the result they can negotiate. Don’t be deceived however by volume alone. Many sellers will list with agents who have volume but mask under-performing results.

You want an agent who is not purely about turnover but also has the following down-packed:

3) A strong marketing strategy for your property

I was in a listing presentation once for a client whose previous agent had given him a very bad experience. They had pointed to their massive record but then failed to deliver on the listing.

The client really had the right perspective… “I don’t care what you’ve done elsewhere, I want to know how you’re going to get a result for my property”.

A marketing strategy for a property should never be completely cookie-cutter in nature. It should be tailored at least somewhat to the specific unique selling points of your property.

In short, look for an agent who is focused on creating a marketing campaign and getting a result specific to your property.

4) Someone who handles calls and follows up professionally

When choosing the right agent, this is a major factor you need to weigh up. I say this because me and my team mystery shop our competition, even high performing and reputable agents.

We find that more often than not, agents will never return your call or give you basic information you request.

When attending a NAB Property Event once, CBRE’s head of projects pointed out to the audience that enquiries are strongest in the following order:

1. Attendees at an inspection
2. Phone enquiries
3. Email enquiries

Ideally, enquiries on email or phone should be responded to as fast as possible and booked in for an inspection. This is because the chances they will attend an inspection falls steeply 2 hours after they enquire.

It’s obvious why.

In this time they are re-thinking buying and looking at other properties. To convert leads, a smooth sales process compresses the decision-making time to remove room for the lead to change it’s mind.

We thoroughly recommend mystery shopping your agents in each of the following ways:

1. Attending an open home for another listing and seeing if they follow you up during the following week
2. Making a phone enquiry and seeing how long it takes the agent to get back to you. You will find that if the agent can’t answer your call straight away, they will forget to call you back at all more than 50% of the time.
3. Making an email enquiry and seeking how long it takes the agent to get back to you.

5) Strong Negotiation Skills

There is major dollar value in having a strong negotiator working on your behalf to secure a stellar price for your property.

A strong negotiator will be direct in their attitude and have a stern resolve to achieve the best result possible. What you need to look for is a professional who understands how to qualify buyers, ask them tough questions and get the best price the buyer is willing to pay out of them.

You also want someone who is going to provide you with assurance when you need to reject the temptation of a poor offer, and hold out for the right result.

They should also be no-nonsense when they need to give you bad news.

6) Marketing and Presentation

Don’t forget the importance of presentation skills when choosing the right agent. Your property needs to present immaculately to the marketplace, and an agent will offer assistance in enabling you to do this.

They will discuss options like refreshing the property or styling it. Your agent should understand that marketing is about making your property stand out. It should appear remarkable in the marketplace, in order to garnish good attention.

Check your agent’s presentation skills on their other listings online or by inspecting their other open homes!

7) Choose an agent you’re comfortable with

At the end of the day it’s very important above all else to feel comfortable with your agent.

Your most important resource will be your gut, and your instincts. Remember to listen to them! Educate yourself on agents, and what you will need in your agent (as you are doing by reading this!) because you want to make the right choice the first time!

Remember to look out for our other insights into:

• Biggest real estate agent myths busted
• Why a traditional or local real estate agent is poorly equipped to give you great service

To price or not to price?

Should you display a price or not when advertising your property for sale? In this day and age, speed and convenience are more important than ever before, shaped by a digital and consumer world where everything is faster and more optimised. 

Should you display a price to the marketplace?

Buyers don’t want the headache of trying to track down an agent that usually doesn’t answer their phone. They want to know straight away without the hassle or headache. They want to know the price immediately so they know whether they will come to the Saturday inspection. 

List your price to the market when advertising your property for sale

You should list your property to the marketplace. If an agent is telling you not to display the price, it may be because they don’t have the confidence in the actual price point. Sometimes, they may even be misleading you with the price. One of the cheapest tricks in the book to get listings is over-quoting. 

At times the thinking is to display ‘contact agent’ in an attempt to drive inquiries. This is because buyers will have to call to find out the price. But when a price is listed, we know that any phone inquiries or attendees at an open home are already interested in this property at this price range. 

If the price has disqualified them, why would they show an interest? 

Obviously there is an exception for those who are just browsing or at the earlier stages of looking at the market. 

How to get your property priced accurately

Before you reach a price when advertising your property for sale, it is important to price cautiously. Pricing should take into account:

1. Current market conditions
2. Recent Sales in the area
3. The opinion of a real estate professional

We have some detailed modules on this subject in our Sydney Listings Academy. You can simply request an SMS appraisal to get a hassle free understanding to begin with.

We hope we helped you answer whether you should display a price when advertising your property for sale. See you again soon!