Kim Macdonald: Is it time to reassess pay for real estate agents, after boom prices boost commission values?

There is a profession that ranks lower than lawyers and politicians when it comes to perceived ethics, yet their pay per client has nearly doubled over the past five years. According to a survey by the Governance Institute of Australia, the general public believes real estate agents are the ones most likely to throw their grandmother under a bus to strike a deal. And yet, we are forking out money to them hand over fist. With commissions worth 2 to 2.5 per cent in Perth and 3 per cent regionally, agents have been among the biggest beneficiaries of the boom. Instead of the $12,000 they got for selling the median priced home five years ago, they now get nearly double — about $20,000 — as the median jumps from $475,000 to $795,000. Firstly, it must be said that the negative perception is just that — a perception. In reality, the vast majority of agents are hardworking, talented and compassionate people who more than cover their own commission. I would not sell my home without one. But the fee upon sale system does not always reflect agents’ effort in a market with inflated prices and ample buyers. I often think about a friend whose unit sold sight unseen to an east coast investor within a day of listing online. You can imagine how she felt handing over $13,000 to the agent. The commission was equivalent to two years of capital gains on the $650,000 unit, when considered over the 14-year ownership period. The agent’s influence on the sale price was debatable, given it was on par with other units in the complex. But then there are others who don’t pay a cent for an agent’s hard work when a property fails to sell, which is something agents have to wear even when it’s due to the owner insisting on an unrealistic price. While many don’t begrudge agents their portion of the commission, most struggle to see how the franchise principal deserves the other half. Maybe that is the bit that should change. It will be interesting to see if anything changes under a new app, bRight Agent, in which agents compete for listings by offering reduced commissions in a type of silent auction. The impact of this app remains to be seen but the industry should remember that if they don’t offer a solution to customer discontent, someone else will.