Naysayers were wrong about commissions reform: Davoren

Naysayers were wrong about commissions reform: Davoren

12 March 2015 by Staff Reporter 3 comments

Many Queensland agents have increased their commissions since the fixed-fee model was scrapped, one franchise boss has revealed.

RE/MAX managing director Michael Davoren said the termination of the fixed-fee model in December had not led to the big drop in commissions that some had predicted.

“The evolving commission range today appears to be 2.5 per cent to 3 per cent, sometimes up to 3.8 per cent; though there are variations on that,” he wrote in a blog for Real Estate Business.

“In conversations with agents across Queensland, I’ve found that while some in the industry have not increased their fee, a lot have; and the increase varies from one area to another, even within a single market.”

Mr Davoren said deregulation has allowed the market to decide an agent’s value and given better agents a chance to earn the higher commissions they deserve.

“Lack of deregulation has long held back the Queensland real estate industry’s freedom to step up and create a top-shelf service,” he said.

“We see the good agents stepping up, being more entrepreneurial in how they add value. They have to be, and more so they have to be able to demonstrate how they deliver that value.”

Agents who don’t understand the value they bring to the sales transaction may discount their fees, Mr Davoren said.

However, discounting models around Australia generally haven’t worked, and many discounting brands have disappeared entirely, he added.

Mr Davoren said consumers don’t need the “false economy” of choosing the cheapest agent.

Rather, they benefit when agents improve themselves and price their services accordingly, because the best-value agent is the one who achieves the highest sale price.

Mr Davoren said that deregulation is also driving a cultural shift in how agents interact.

“In the United States, the average commission rate of six per cent successfully has agents working together to sell properties – as buyer agents and seller agents – and they can afford to do this because of their commission fee,” he said.

“In Queensland, the original commission cap wasn’t conducive to conjunctional arrangements between agents and limited agents working together.”

[LinkedIn: What can the industry do to increase commissions?]

Click here to read Mr Davoren’s blog.

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