Real estate the Australian way? It won't solve US commission woes

I recently returned from a three-week vacation in Australia, and it was as exciting and magical as my previous visits. Still, this time, I wore my “sales agent hat” while vacationing in the land down under and uncovered some incredible insights about their real estate market and practices.

I was fortunate to travel to this remarkable country three times in 2013, 2016, and 2018 due to my husband’s job, and the fourth time was an absolute charm. While this was not a work trip but rather a personal one, the real estate agent in me was on a mission to learn more about the Australian way when it came to real estate — especially after the commission rhetoric that the United States should do things more like the way they are done in Australia. 

From prior visits, I knew that properties were sold by auction, and it seemed like viewing opportunities were limited. There were no all-day open houses, and typically, most of the public viewing times to see properties were on weekdays in two-hour increments.

I loved poring through Australian property magazines that broke down prices, sales statistics and appreciation by various cities and neighborhoods across the country to learn as much as possible about their markets. 

But on this trip, I wanted to learn more and talk to consumers who had been in the trenches of buying and selling, as well as an agent whom I had gotten to know who had relocated back to Australia after a stint in the U.S. In the course of catching up with lots of “mates,” social conversations with various people we met along the way, and taking in what the national news was talking about real estate-wise, here are seven differences I discovered.

Commissions and compensation

While plaintiffs’ attorneys and other armchair supporters of the Australian real estate system love to tout their lower listing commissions compared to the United States, according to the real estate portal Realestate.com.au, commissions can vary according to where you live. Still, they cite a national average of 2 percent to 2.5 percent.

Consumers I spoke to told me they can be in the 1.25 percent to 1.75 percent range, depending. But of course, there is much more to the story behind these percentages. 

What wasn’t pointed out was that agents in Australia are paid a base salary when they work for a firm, which is around $80,000 per year. As for health insurance? Well, that is provided by the government and private health insurance, should you desire to have it, costs around $300 to $400 per month.

I would say that having an $80,000 salary right out of the gate is a pretty decent base to be able to build one’s business without the burden of worrying about health insurance and all the expenses that go along with that. 

Auctions in this country are often viewed as a method of last resort when complicated or highly unique properties don’t sell the traditional way. One agent had been looking into various career options when they were relocating back home.

They shared they were offered a managing broker position at one of the more well-known real estate brands with a very healthy six-figure salary. The amount they were offered astounded me, yet they chose to go to the sales agent route for greater earning potential despite the hustle and grind that would be involved in getting established. 

Higher sales prices 

Along the east coast of Australia, markets like Sydney have some of the most expensive real estate in the world. According to the website Statista, the average sales price is around $1.4 million.

Because properties in Sydney revolve around their gorgeous harbor and stunning beaches, many properties are priced much more than that. It is not unusual to routinely come across properties priced from $4 million to $20 million on up. According to the Australian Bureau of Statistics, the average sales price of a home in the entire country is $925,400. 

One of the fallouts of having higher sales prices is how challenging saving for a down payment becomes. According to an article in Forbes Advisor about the Australian real estate market, it now takes, on average, 10 years to save for a deposit on a home, citing the annual ANZ CoreLogic Housing Affordabilty Report. 

Auctions 

Contrary to popular belief, not every property sells in Australia via auction. Some agents would rather not put their listing up for auction for various reasons, including the risk of it not selling at a price the seller would be happy with. With auctions, it is all about exceeding price expectations with a seller, which tends to set a very high bar with a ton of pressure. 

Our friends were relocating from Sydney to Melbourne, and had purchased a property a few months ago via auction. They explained that on auction day, no bidders and no buyers showed up at the auction. The only ones there were our friend’s mother and a friend of theirs who was a property valuator (i.e., appraiser), both of whom were acting as their representatives, along with some curious neighbors as spectators. 

With no one else in attendance, there was no need to bid against themselves, and they waited until the auction was over. They ultimately negotiated an excellent deal on this home outside of the auction.

The listing agent who was supposed to be pushing hard on the price for his vendor (i.e., seller), I’m told, did very little to do so, and our friends had a considerable amount of leverage in working out an acceptable price and terms. 

Listing properties

When it comes to listing a property, in addition to the commission, what many people may not realize is that listing agents collect a marketing fee from the seller upfront to cover the cost of a custom real estate sign, listing the property on two websites — Domain.com.au and Realestate.com.au (there is not any MLS in Australia) — and whatever else the agent wants to do.

Having talked to several people who have recently sold property, the marketing activities done can vary significantly with no standard other than a sign and being posted on the two websites. Both real estate websites charge an upfront fee to be listed. 

According to Realestate.com.au, you must hold a real estate license to list a property and pay a 12-month subscription to the platform; they don’t accept one-off property listings. That means the same payment is required regardless of one listing or 100, and they have different levels of subscriptions that offer varying features. The platform does not allow private owners to post listings on their site. On Domain.com.au, quotes to list a property are based on the price of the property. 

In talking to a few people who had recently sold the property, I heard marketing fees collected ranged from $3,000 to $30,000, and these recent sellers did not see much value in what they had to write a check for upfront.

A perceptibly “low” selling commission rate doesn’t solve all issues. Unlike in the U.S., sellers felt forced to pay for something upfront without guarantees or a system of performance before paycheck. 

In Australia, sellers do not get the marketing fees refunded if the property does not sell. In one case, a person I spoke with who sold an investment property paid $30,000 in marketing fees, and the property did not sell during the listing period. They were unhappy with their agent, who was full of hype rather than producing results. 

They didn’t see tangible evidence of additional marketing efforts besides the basic sign and listing of the property on the two websites. The contract contained a protection clause: Should the property sell within so long after the listing agreement expires, the agent/brokerage would be due a commission.

Well, guess what? A buyer crossed the seller’s path a few weeks after the listing expired, and they still had to compensate the listing agent on top of what they had already paid the brokerage for marketing. 

There is a one-day cooling off period with listing agreements from when a seller signs with you as an agent, so a homeowner could change their mind during that time. While all terms are negotiable, some listing agreements state the commission is paid out of the buyer’s deposit, typically around 20 percent. 

Oh, and in Australia, homeowners are allowed to post “No junk mail” signs on their mailboxes, and I consistently observed this as I walked through various neighborhoods on my travels. So, what exactly constitutes junk mail? No guarantees that a postcard mailing will be delivered. 

Buyer’s advocates

Contrary to implications in the various commission lawsuits that buyers go through listing agents in Australia and buy properties at auction, I heard from several people that buyer advocacy is becoming increasingly popular. Researching the use of buyer advocates in Australia revealed quite a bit of information. 

The Real Estate Buyers Agents Association of Australia (REBAA) is a professional association established for buyer agencies, and its website gives a comprehensive explanation of what a buyer’s advocate does, the range of services they can provide, and how they are compensated. 

In Australia, buyer advocate services are paid for by the buyer, and fees involve paying the agent a retainer/engagement fee upfront in addition to their fee for services rendered, which can range from a flat fee (which varies according to the property search, price, etc.) to a percentage of the purchase price.

According to the REBAA’s website, the industry average fee for buyer’s agents is between 2 percent to 3 percent of the purchase price, plus the Goods and Services Tax (GST) and the engagement/retainer fee. 

Some advocates may offer a tiered fee structure depending on what you want them to do. Is a buyer going to attend property viewings (known as inspections or open houses) on their own to find what they want, or do they need an agent’s help identifying suitable properties? Because there is no MLS, it is often the buyer advocate’s relationship with other listing agents that leads to bringing possible properties to the buyer’s attention, which requires a lot of hustle. 

In any case, buyers paying a buyer’s advocate is customary for the way things are done in that country. Australia is different because the cost of living is generally higher, and goods and services cost more than the United States.

Australians also pay more in income taxes than the United States, generally in the 32 percent to 45 percent range for middle to upper-level income, but their compensation accounts for this. 

Buying without an agent

So, do any buyers buy without using an agent? Yes, many do, but I’m told you are basically on your own, left to conduct your research, which also means you may find out enough to make you dangerous. Still, ultimately, you aren’t able to interpret what you find correctly and may not know what you don’t understand.

Buyers may not have access to the resources and tools an agent does, and a buyer’s advocate may be able to uncover key pieces of information, such as the seller’s situation, motivation or reason for selling due to their relationship with the listing agent. 

One colleague who had recently bought a home that was not up for auction without using a buyer’s advocate said he learned after the sale that the seller was quite motivated as he was buying another property. Because he was not an Australian citizen, he could only legally own one property, so he was quite anxious to unload the one he currently owned.

This buyer, who paid several million dollars for his home, wondered if he could have negotiated a better deal had he known. This person had bought and sold multiple properties in Australia before, so he felt comfortable going it alone, but perhaps a buyer’s advocate could have resulted in a different outcome.

In Australia, it is customary for a buyer to conduct investigations/due diligence before making an offer. This means paying to bring in inspectors and whatever other professionals and experts you need to help you evaluate the property. Can you imagine how quickly that can add up if you make offers that aren’t accepted or if you’re outbid at an auction? 

My understanding is there could be more than one inspector or other contractors deployed by potential buyers in the property during an open viewing time. This sounds quite chaotic to me. This buyer brought in a builder before making an offer and submitted a list of items he wanted the seller to repair/address as a condition of the offer.

While we could do that in theory in the U.S., that deviates from much of our local real estate customs, and many listing agents and sellers would be leery of allowing that when a buyer does not have an accepted offer for all sorts of reasons. 

Real estate as a way of life

Several people told me that Australians love their real estate and are always interested in talking about property values, where to invest and where the next hot market or neighborhood is. The national news covers real estate regularly, and I saw several segments on their version of The Today Show.

From property values to the best areas to invest, real estate seemed to be given far more airtime than you would find on a national morning news show in the United States. Of course, we tend to have way more happening news-wise. Their national weather forecast is a part of the morning and evening news reports. 

One segment I caught featured a real property expert focusing on investment properties. He recommended that Australians pay off the mortgage on their existing home by buying two investment properties to rent out and sell in a few years based on the appreciation. That seemed like risky advice based on assuming that whatever you bought would appreciate to that degree. 

What if the properties didn’t appreciate enough to do that, and you were saddled with additional expenses and stress that now come with owning three properties? At the same time, this “expert” was also advocating looking for affordable investment properties in less expensive areas where the appreciation may not be as great, hence the need to work with an experienced agent. It came across as a subtle plug for what he did — sort of a conflict of interest. 

But that thinking is not unusual, as I’m told Australians love to leverage their equity into the next property, whether that is a primary residence or as an investment. Given a continued high rate of appreciation in that country, Australians bank on that and many love to keep trading up.

One couple we came across while waiting for a ferry in a very “upmarket” (Australian lingo for upscale or luxury) neighborhood of Sydney were from Canada visiting their son and his family, who recently sold a townhome they had initially bought for $4 million a few years ago, for, now, $10 million. They had subsequently traded up to a single-family home in the area for even more than that. 

Other news segments focused on the appreciation rates in the various markets across the country and what cities are projected to be good buys appreciation-wise. The Aussies love their appreciation statistics regarding real estate, and that data is easy to find in magazines and various property websites online. 

The wrap

In short, the Australian way is not the United States way in many things. As wonderful as that country is, using what goes on in other countries as a commission model that the United States should follow regarding real estate makes no sense. As I uncovered, it is not necessarily less expensive for the consumer. 

Just because the Australians drive on the left-hand side of the road, should we do so? Every country has its own dynamics, customs and economics specific to them. I’m not sure the Australian system costs buyers or sellers any less in the long run since they pay out-of-pocket fees for services rendered.

One significant advantage to their system is agents do receive some compensation, unlike the U.S., where agents don’t receive a dime until a property goes to closing. 

With marketing expenses paid for by the seller, the agent is not out that money, which typically happens in our country, whether the property sells or not. Between getting a base salary if you work for a firm, the commission that could be paid out of a buyer’s deposit or a buyer’s retainer/engagement fee being collected upfront before an agent starts working with a buyer, on top of the security of government-provided health insurance and affordability of private insurance, the Australian way offers some sense of security and sanity in a business that is anything but.

And so far, no lawsuits that I’m aware of.   

Cara Ameer is a bi-coastal agent licensed in California and Florida with Coldwell Banker. You can follow her on Facebook or on X, formerly known as Twitter.