What if you could save thousands of dollars by understanding the intricacies of real estate commissions and fees? Join us on Monday Novak News with Bidhan Shrestha and Lisa Novak as we unpack the hidden layers of real estate transactions. We start by demystifying agent commissions, revealing the extensive behind-the-scenes work and the critical role of trust between agents and vendors. We'll give you the insider scoop on what commission rates in New South Wales typically range from and why agents are only paid upon the successful sale of your property.
Next, we address the often-overlooked issue of property management fees and the true cost of choosing the wrong company. Through real-world stories and cautionary tales, we highlight how experienced property managers can save you from costly mistakes and ensure your investment is well-protected. Learn why opting for the cheapest management company might end up costing you more in the long run and how to scrutinize low management fees for potential hidden charges.
To wrap things up, we guide you through the process of transitioning property management to Novak, from handling termination periods and paperwork to tenant screening. We’ll discuss the importance of selecting a reliable managing agency and share flexible payment options that can make the transition smoother. Plus, we emphasize the importance of carefully reviewing sales agreements and understanding the negotiability of their duration. With this episode, you're not just getting informed—you're empowering yourself to make smarter real estate decisions.
What if you could save thousands of dollars by understanding the intricacies of real estate commissions and fees? Join us on Monday Novak News with Bidhan Shrestha and Lisa Novak as we unpack the hidden layers of real estate transactions. We start by demystifying agent commissions, revealing the extensive behind-the-scenes work and the critical role of trust between agents and vendors. We'll give you the insider scoop on what commission rates in New South Wales typically range from and why agents are only paid upon the successful sale of your property.
Next, we address the often-overlooked issue of property management fees and the true cost of choosing the wrong company. Through real-world stories and cautionary tales, we highlight how experienced property managers can save you from costly mistakes and ensure your investment is well-protected. Learn why opting for the cheapest management company might end up costing you more in the long run and how to scrutinize low management fees for potential hidden charges.
To wrap things up, we guide you through the process of transitioning property management to Novak, from handling termination periods and paperwork to tenant screening. We’ll discuss the importance of selecting a reliable managing agency and share flexible payment options that can make the transition smoother. Plus, we emphasize the importance of carefully reviewing sales agreements and understanding the negotiability of their duration. With this episode, you're not just getting informed—you're empowering yourself to make smarter real estate decisions.
Speaker 2:
Here we are live for Monday Novak News. After the lovely weekend, it's Mipetan and Lisa Novak.
Speaker 1:
Hi guys.
Speaker 2:
Hello, talking about agents, commission fees, I think the most interesting topic that everyone asks what's? The selling fee. So here we are. Stay tuned and we will talk about it further.
Speaker 1:
This is a big topic, isn't?
Speaker 2:
it Badan.
Speaker 1:
It is a big topic, you know. People are always intrigued about how much commission agents make and often in the real estate industry agents love to talk about how much commission they make. I must say funny story actually when I first started in sales quite a few years ago now, I remember doing an interview and I was asked in an interview what my GCI was, what my gross commission was for the year, and I was like that's a really weird question. But I soon discovered that agents actually do love to talk about how much commission they earn.
Speaker 1:
There seems to be some sort of a pecking order. You know, I think it's an unusual question, but anyway, it's quite normal in our industry. But tonight we're going to unpack it a little bit for you guys and we're going to talk about commissions, what's normal, what's not, and then we're going to dive into a little bit about management fees as well. I think it's a great topic.
Speaker 2:
Definitely. I think it's pretty much everyone transacting on a day-to-day basis. Price is kind of the thing driving a lot of factors. And if you're selling your property that you own and want to rent it out. I think what's the management and agent fee? The fee is kind of the main aspect.
Speaker 2:
I believe, I think makes a big difference to people while choosing the right agent and everything if comes down to price as well Performance. I think you have transacted a lot of properties, I believe, lisa, and I think fee has come across pretty much on every conversation with the potential vendors.
Speaker 1:
You know you'd be surprised. It's funny I'm often saying to my vendors you know, if all of us agents were the same, who are you going to choose? Because certainly you've got some you know vendors out there that are looking for agents that are offering the cheapest commission and then you've got some vendors out there that you know they just don't ask. You know they're wanting an agent that's got a really, really in-depth knowledge of the area. They want an agent that they know they can trust. Trust is the biggest thing.
Speaker 1:
I have to say. That is the number one biggest thing that I come up against. Or you, you know, the question that I will often ask a vendor, you know, is that what is the most important thing and I can tell you now, hands down guys, that is. I don't know how you put a dollar value onto that. So I did a little bit of research. Actually now we're obviously Sydney based, we're here on the northern beaches, so I do know that commissions can change considerably depending on what area you're in and also depending on what state you're in.
Speaker 2:
Definitely big time.
Speaker 1:
So realestatecom. I was reading a little article on there just before I came on here and they were stating that the average commission and that's here in New South Wales guys should be sitting at somewhere between 1.8% to 2.2% plus GST.
Speaker 2:
That's an interesting number there.
Speaker 1:
So when do we get paid? Let's talk about that, Badan. When do we get paid our fee?
Speaker 2:
So normally I do have to come across. People think as soon as the property gets sold I'll get my money at my property. But unfortunately that's not how it works. Wish it was that way. So normally after the property gets sold it'll settle in four to six weeks. No standard terms whatever has been negotiated. So after settlement we'll transfer the amount to the owners. So it will be held in either the agency's trust account or the solicitor's trust account and after settlement it will just get passed along.
Speaker 1:
And then what happens if we don't sell the property?
Speaker 2:
If we don't sell the property well, we don't get paid.
Speaker 1:
So there's not many industries, guys, where people work for free until they get a successful sale. So you know when people are talking about how much money real estate agents make. We only get paid on the successful sale of a property. So if we don't sell the property, we can work for weeks, sometimes months, and not get paid. There's no guarantee. There's absolutely no guarantee. And it's interesting because it's not just about turning up to an open home, opening a door, taking down some names and numbers, getting an offer and the deal is done. There is such an enormous amount of work that goes in behind the scenes to selling a property. Now we are sitting here and it's eight o'clock on a Monday night, and sure we're here doing Novak news, but what time are we here usually?
Speaker 2:
Until Until 8, 8.30. But pretty much I think time hasn't been a factor. When you start working Like you don't look at time oh 5.30, let's just go, Then the other vendor's waiting for your call. They'll be buyers waiting for your call, I think pretty much every day.
Speaker 1:
We're here until 7, 7.80 pm. Yeah, and it is seven days a week. You know the phone rings, inquiries come in and our job. Or you know vendors have got questions, buyers have got questions. You know we're negotiating sales and this is happening. You know literally from, literally from what I know for myself, the minute I open my eyes until the minute I go to sleep and I know that's the case with, uh, with pretty much everyone here in our office as well.
Speaker 1:
So the hours are long and relentless, but there are thousands and thousands of things that go on under the iceberg. Um, in order for us to to be able to earn that sort of commission, there really is, there's, is there's a million different stages. There's lots of moving parts there certainly is. So the average commission again seems to be somewhere between that sort of 1.8 to 2.2% plus GST.
Speaker 2:
I do want to say this guys if you are interviewing multiple agents.
Speaker 1:
Most people usually would interview two to sort of three, maybe four, real estate agents. If you are coming across an agent that is offering you a super cheap commission, alarm bell should be ringing. The new.
Speaker 2:
Agree, but I'm definitely someone's offering something same. They'll say we're offering the same thing but cheaper. Something should go off. What's the catch? That should be their question. What's the catch? You get what you pay for. You get what you pay for, so definitely alarm bells should be ringing.
Speaker 1:
And I would be asking that agent why are you so cheap? Yeah, I think you know that's probably a really good question to ask and likely it's because it's the only tool that they have in their belt. So, as I said, you get what you pay for guys. So please be really careful with that. And, as I said, that average is really something to work off there.
Speaker 1:
There's varying ways that you can do commission as well. So you've got your fixed commission. So if the agent, for instance, is offering a 2% commission, that's a set commission on the agency agreement. There's also what's called a sliding scale commission. Sometimes we'll have vendors that'll say listen, if you can get me somewhere between $1 to $1.1 million, I'm happy to pay you the 2%. Anything that you get over that $1.1 million, I'm happy to pay you the 2%. Anything that you get over that $1.1 million, I'm happy to offer you an accelerator, all right, and it might be 10% per every, whatever it might be, you know, 10,000, 100,000, whatever it might be over and above. So it's almost an incentiviser. We call that a sliding scale. And the other one is a flexi fee fee. Do you want to describe what that is?
Speaker 2:
I think that's probably one of the best ones in the industry. It kind of gives the owners, the potential sellers and vendors the power to choose the agent over the performance rather than the fee. So flexi fee, as the term says, if it's 1.8 to 2.2 after the successful sale of the property, you as an owner can nominate a fee. Let's say oh guys, you guys did amazing job, we'll give you 2.2, thank you for the great job, and you know you nominate that as a seller. Or you say you did a great job still, but I'm tight with money, I will go with 1.8, you know, plus gst, of course. So, of course. So that's something. Flexifee, I mean it gives the ball to the owners saying you know you nominate a SOFI, we'll do the best we can.
Speaker 1:
Yeah, that's right and it's sort of leaving that over to the vendor to nominate what they would like to pay an agent. We offer FlexiFees for certain properties and it's funny because I've been asked many times by vendors well, hang on a sec, wouldn't I just opt for the lower end of the commission? It's like well you know, if I got you a million dollars more than what you were hoping for, that fee doesn't really come into account. So if you're basing it on service and results and you're overly happy with the service that you received and you're overly happy with the result that you received and you're overly happy with the result, then you know you might get paid at the at the higher end, but it's great. It means that you can sort of cut out a lot of that competition as well. So flexi fee is is you know it's a great option and it also shows a vendor that you're not just commission driven. In fact, there's our fee and you opt to pay us whatever you would like and you can make that decision once the property has successfully sold.
Speaker 1:
Now agency agreements. You want to be careful, guys. If you have signed into an agency agreement that is still effective and you haven't terminated that agency agreement and, for whatever reason, it didn't come to fruition with the agent that you'd signed up with and then you've gone and signed on with another real estate agent into an exclusive agency agreement. You want to make sure that you're not going to be up for two commissions. All right, so be super careful of that. That's only if you have an exclusive agency agreement that is in effect and it hasn't been terminated and you signed in with another agent with an exclusive agency agreement. You don't want to be up for those two commissions, so you just want to be super careful of that as well. Let's talk a little bit about I want to get into management fees as well. So we get asked this question a lot. We manage a lot of property here on the northern beaches. We manage over 1600 properties. What's the average management fee for done? Average?
Speaker 2:
money. I think probably around five to six percent. That's where most management uh fee comes in. But same with this, some people, what have you seen in the industry? They will get in the landlords, the owners with a low management, who will only give you 4%. That's lower than the market, which is 6%, but there'll be lots of hidden charges at the back.
Speaker 2:
So you have to again. Someone's offering a low price, you have alarm bells to go off. Hey, why the low price? How can you guarantee you'll offer the same service with such a low cost? So I think that has to be questioned. So, being 5% to 6% less standard management fee.
Speaker 1:
Yeah, I agree, plus GST. So again, you know, somewhere between that sort of 5% to maybe 7%, plus GST, is the average. If you've got agencies out there or your managing agent, you know, is coming to you or trying to get your business and they're saying that we're happy to do a three or four percent management fee, again I think you need to be asking why. Now the the property management side of our industry is an interesting part, because there's not a huge amount that you can find online. It's not like in real estate sales. You can put in badan's name, you can put in lisa, that's gonna come.
Speaker 1:
All of these reviews and the property management side of things is a little bit different and you know, I often say to a lot of my clients when we're talking about management's you just want to see who it is that's going to be looking after what is potentially one of your largest assets, right? And so let's put it this way, guys, the best analogy I give is this Badan's got a property and it's worth $2 million, right, and you're looking for someone to manage it for you. You are effectively giving $2 million in cash to your property manager to look after. Now you want to make sure that they are not new in the industry. You want to make sure that they weren't a beauty therapist last week, right, and this week they're managing your $2 million asset, so you want to know how experienced are these property managers, just like real estate agents? All real estate agents and all property managers are definitely not the same. We hear some horror stories managing over 1,600 properties. Sometimes it's because they've been self-managed and sometimes it's because they've been mismanaged by other agencies.
Speaker 2:
Definitely I can't vouch on that more though. Yeah, there's plenty of people in the industry. There's different ways to go. It's just like Lisa mentioned you have $2 million cash in your hand. Who do you want to give it to? I think you want to interview every single one in the area, get the best one and even their benefit higher. That means the service is going to be great. The fee is there for a reason and I think, as an agent, we're proud of our fees because we know you're going to get best value 100%.
Speaker 1:
And so you know, it's not a bad question, guys, to ask how long has the property manager that's going to be looking after one of your biggest assets, how long have they actually been working A in the industry and B with that company? Because what you may find is, you know, you've got a property manager who was here last week but they're gone the next week and who's looking after your property now. For instance, we've got property managers, so our three senior property managers that look after our portfolios. We've got property managers, so our three senior property managers that look after our portfolios. Um, we've got brunca. Brunca's been here for everyone knows brunca brunca's been here for over 15 years.
Speaker 1:
In fact, I think it's coming up to 17 years. Um, brunx has been in the industry for that long and that lady has a wealth of knowledge and it's going to offer you a service like you've never received exactly, then we've got cleo. Yeah, cleo's been here for I think 10 plus years cleo's been here for a long time as well and cleo's been in the industry.
Speaker 1:
So cleo's been here with novak for about 12 years, I think, and has been in the industry for over 15 years. And then we've got Tina, our little pocket rocket. Tina's been here for over eight years and has been in the industry for over 10 years. These ladies have got a wealth of experience. So when something goes wrong, you know that you're going to be in great hands. All right. So please be really careful. And often the properties that come over to us that are in dire need of assistance it's because they were with managing agencies that just weren't experienced at looking after these properties. Totally makes sense.
Speaker 2:
I have come across quite a lot of landlords. They've been throughout two years of their property being managed by a managing agent. They got calls from four different property managers, so because there's so much revolving doors.
Speaker 2:
The property manager is kind of getting passed along, so the landlord being someone say talking to X, XYZ, and it keeps on going on. So I think that's the beauty about here having like experienced property managers so in combined 40 plus years of experience with the three senior managers, you have the same point of contact. And imagine you're calling and there's branka saying hey, david, how are you doing so? Every time there's one point of great contact every time.
Speaker 1:
Yeah, yeah, I'll tell you a a story.
Speaker 1:
Actually we had a landlord that was here with us for quite some time.
Speaker 1:
He was poached by another agency who was offering a much cheaper management fee In fact it sounded horrendously cheap and took three of his managements and he was with this other company for about 12 months anyway. I actually saw him downstairs in our office the other day and he was here to see bronco and um. He brought the managements back over, but the properties had been so mismanaged that what he was trying to save in the management fees which was we were talking about, you know, maybe a few thousand dollars over the course of 12 months it ended up losing about three hundred and fifty thousand dollars because the property had been mismanaged, as in routine inspections weren't being done. The tenants that went into the property were properly screened, right. We might just touch on that for a second Badan about what do people get for those management fees. The norm in the industry, or the norm here with us at Novag, is when you've brought over your management to us after the first three months, you're getting a routine inspection done. It's a video inspection.
Speaker 1:
So you're not only getting photos, photos, but you're actually getting a video of your property which is critical, and then, if we like the look of everything after the three months, then the routine will be done at the six month period after that and then every six months moving forward from there. And again, that is a video routine inspection. But you know it's a little bit like insurance. But, dan, you know, when you've got a great property manager you don't realise how much you need that person until something goes wrong. And when it does, it does happen very, very quickly.
Speaker 1:
Additional fees on top of those management fees are one week's letting fee, because we only get charged once we've got the tenant inside the property. But there's all this work that goes on in the lead up to that. So it's one week's letting fee to secure the tenant. And then you've got a small amount of marking fees as well, for For property management you're talking about a few hundred dollars and that includes your professional photos and your signboard and getting you onto realestatecom and domain and, of course, going out to the Novak database as well.
Speaker 2:
So I think $350 to be accurate to do all that.
Speaker 1:
So not a huge amount on top of that, but what you were saying Bad, but, dan is actually a really good point, because often what we find with these agencies that are offering these ridiculously low alarm bells ringing management fees is that there's all of these hidden costs. Yeah, um, and some of those hidden fees are if you need some maintenance done, they're charging you for that. If you need some repairs done, they're charging you for that. So you want to be careful of that guys. You want to be really careful of it.
Speaker 2:
Lots of stories, lots of stories. So many landlords are frustrated because there's so many hidden fees. This other day I found out they charge you for transferring money to your account. So just because that's all the managing part. You're collecting rent and sending to the landlord. So they're charging 50 bucks every month just to send that money through. That's easy transfer, so rather than a cheap management fee but there's hidden fees like this. You know sending money, it should be free of cost.
Speaker 1:
Or those landlords that want to get their. You know it depends on how their mortgage repayments are set up. Some landlords don't want every 30 days, they don't want it on at the end of every month. You know they want it every 14 days. And so you know some agencies out there are charging additional fees for that.
Speaker 1:
Guys, I do want to point out if you are with an agent who is managing your property and you are not happy with them, changing over your management is very, very straightforward. The agent that you're with or the agency that you're with, is going to tell you otherwise. Alright, but it is very straightforward. There is a termination period that you will have on the agency agreement that you had signed. Usually it's 60 to 90 days Termination that you've got to give to your managing agent. So it doesn't mean that sorry. Rather, you shouldn't have to be in this uncomfortable position for 60 to 90 days once you've told them that you're terminating.
Speaker 1:
And then there's this awkward period. For instance, if you were coming over to us, we would pay out that termination period. So we pay out your 60 or 90 day termination of whatever those management fees are to bring that management over to us. So NOVAC will cover the cost of that termination period. Right to bring it over. We can have it over and under our wing very quickly, usually within 24 to 48 hours. However long it takes for the managing agency to gather up all of your files, we will go and collect them all and we will even send over a termination letter on your behalf. Yes, and do all of that communication with you pretty much I think that's the easiest part.
Speaker 2:
Here at novak we take care of everything, all the paperwork, uh, you know, in your behalf. So all you have to do is say call us and say we want to sign up, that's pretty much it absolutely.
Speaker 1:
but I'll tell you, you know, we've run our agency now for over 22 years and where I see things have gone wrong the most, to be totally honest with you, is when people have gone out looking for the cheapest managing agency or the cheapest real estate agency. That's usually where I see things go wrong the most. I really do, and I've heard some absolute shockers. I really have, you know, you just want to be really, really careful. You want to make sure that your managing agency is screening the applicants. There is a very, very stringent screening process that we go through here. You shouldn't just be, you know, having that managing agent just signing off on any old tenant and also making sure that you know they're negotiating everything so that it is absolutely, in, you know, in your best interest as well.
Speaker 1:
Um, and then going back to commission as well, guys, I just want to point out um on top of commission. So the agency commission usually and I'm talking about the south side of it now, sorry I'm jumping around a bit um, but the agency commission usually does not cover marketing fees. So you've normally got that on top of whatever that commission is. Some agents will take out marketing fees at settlement. Some will require those upfront. For instance, we do have a pay later option as well. We use a company for that pay later option and we also offer a zero dollar marketing um strategy as well, which has been enormously successful for our clients which all the five and just love that.
Speaker 1:
I believe absolutely so alexander, yes, 1.8 plus other costs. So, yes, that's the commission that we get paid um. So we get paid that. Let's call it 1.8. We get paid that, let's call it 1.8%. We get paid that when we have successfully sold the property. And then, in addition to that, usually there are some other charges, and they might be. You know the real estate portals, realestatecom.
Speaker 2:
And they are very powerful at the same time too.
Speaker 1:
They absolutely are. But we do offer a $0 marketing option as well. We've got a trial and test pre-market or off-market marketing campaign for properties that we bring on the market. There you go. Where did that 24 minutes go?
Speaker 2:
24? What 24? Very good, I think we still have to cover one important thing Go for it. How with management? There were 60 to 90 days, I think people that are selling the house and need to be more careful with how long the actual sales agreement is with the selling agent. Great point, yep, I think in a voucher need hire with some recent experience that you had, I think people it's a contract actually appointing a sales agency to sell your property, so that's a proper contract.
Speaker 2:
So every clause I think has to be read very carefully. There would be some hidden things there. How long is your agency? Because you can only have one selling agent at a time. If there are two active contracts, you're paying twice the commission for the same property. So I think you have to If you're in an exclusive agency, yeah, if you're in an exclusive agency.
Speaker 1:
If you're in an exclusive agency, if you're in an exclusive agency, so what's a normal? Let's just touch on that very quickly just before we wrap up Bidan. So a normal agency agreement, the duration of that is usually 90 days. That seems to be particularly here in New South Wales, that's the industry norm. That part of the agreement is also very negotiable. So you might say, you know, if you're a vendor, you might say 90 days is just too long. Would you consider a 60 day agreement? So that part of that agreement or that contract is actually very, very negotiable. But the standard here in New South Wales is 90 days. 90 days, it is.
Speaker 1:
Yes, we do use campaign agent. Hey Drew, I hope you're well. We do use Campaign Agent. So for those of you guys that are watching, campaign Agent is a pay later option. Lots of real estate agencies use it. It's a wonderful tool and it means that you know, if you just simply don't have marketing funds, if you just don't have enough money, to you know, pay for a stylist to come through these sorts of costs. To you know, pay for a stylist to come through these sorts of costs can, you know, add up to tens of thousands of dollars. Sometimes there's a company called Campaign Agent, very easy to apply, very easy to get the funds. They pay the real estate agency so that we've got those funds sitting there on your behalf. There is a very small fee that is paid as well, and then those funds are taken out at settlement. So yes, we do use campaign agent as well.
Speaker 1:
We've got some other questions there. On average, how many percent of selling costs should be allocated for all expenses? There's not really a percentage, alexanderander, it's um. You know the marketing side of things doesn't really work like that. Um, if you are selling your property and um you know your, your real estate agency is asking you for tens of thousands of dollars for marketing, I think you need to have a good hard look at um exactly what it is. You are being charged for Things like realestatecom and domain. You know the country's largest real estate portals. As agents, we all have set rates. They do vary sometimes from area to area but, for instance, if you're selling here in DY and I've given you a rate for realestatecom and then you've gone to the agency down the road, that rate should be the same. But marketing doesn't really work on a percentage of what your property is worth. I hope I've answered that question for you, definitely.
Speaker 2:
Yeah.
Speaker 1:
All right guys, We've covered most of it.
Speaker 2:
Don't want to. I think that's a wrap.
Speaker 1:
I think that's it. Thanks so much, Badan. It's been nice doing an OVAC News with you Exactly, Really really nice. It's been a pleasure.
Speaker 2:
So I think, in summary, fees are there. All agencies will have different fees, average of 1.18 to 2.2 plus GST, and it gets paid after the work's done, in settlement, not as soon as you appoint an agent absolutely and, um, that's correct, doesn't come out, doesn't come out until settlement, and then with the management fees, really somewhere between five to seven percent plus gst.
Speaker 1:
Guys, if you're and again we're here on the northern beaches in sydney, if you are hearing fees that are significantly lower, I think you've got to be asking um, you know that the managing agency or the real estate agency, why that should be setting alarm bells off. Hopefully that's helped some of you guys out there. See you guys, perfect, see you, take care. Thanks for done.
