How much do real estate commissions cost in New Zealand?

Using agents can set back home sellers thousands, but expert says benefits outweigh the cost

How much do real estate commissions cost in New Zealand?

As New Zealand’s housing market continues its hot streak, the debate rages over whether real estate agents are earning easy money through commissions and whether property owners are better off selling their homes on their own.

A recent analysis by the Real Estate Institute of New Zealand (REINZ), however, has revealed that home-sellers who enlist the services of an agent can expect to sell their properties by an average of 15% more than those who sell their houses privately.

REINZ has analysed data from private sales and compared the numbers to sales where a real estate agent was used. It found that the national median price for home sales involving an agent was $673,000, higher than the $585,000 median for those who sold privately.

The difference was the largest the institute has seen in 18 years. Back in 2015, the figure was 8%. It rose to 11% in 2016 and 12% in 2017 before dropping to 5% in 2018 and another 6% in 2019.

Bindi Norwell, chief executive officer of REINZ, said the findings highlighted the true value an agent can bring to the home-selling process.

“While REINZ is the industry body for real estate agents around the country and could therefore be accused of being biased towards agents, as an organisation we have never argued for a ‘closed shop’ and believe that people should have choice when it comes to choosing how they want to sell their property – and indeed some do,” said Norwell. “This research is just about providing people with the data on using an agent compared to selling themselves so that they can make an informed decision.”

How much do real estate commissions cost?

Real estate commission ranges from 2.5% to 3.95% of the sale price up to the first $350,000 to $400,000, then 2% to 2.5% on the amount paid above that, according to Agent Finder NZ, the country’s only real estate agent vetting service provider.

If an agent works for a real estate company, the commission can be split 50-50 between the agent and the agency they work for, although the portion can be bigger for more established agents.

Agent Finder NZ prepared the table below to help sellers work out how much commission they need to pay based on the sale price of their homes. The figures are based on the first $350,000 at either 2.5% or 3.5% commission, with any amount above that based on 2%.

Sales price

2.5% commission

3.5% commission

$350,000

$8,750

$12,250

$450,000

$10,750

$14,250

$550,000

$12,750

$16,250

$650,000

$14,750

$18,250

$750,000

$16,750

$20,250

$850,000

$18,750

$22,250

$950,000

$20,750

$24,250

$1.5m

$31,750

$35,250

$2m

$41,750

$42,250

Source: Agent Finder NZ

What are the advantages of using a licenced real estate agent?

REINZ research also noted a steady decline in homeowners selling their properties privately in the past few years. Accounting for almost a quarter of the overall home sales in 2014, private sales took up just 20% in 2018 and 14% last year.

“Selling privately works perfectly for those who have the time, inclination, expertise and patience to do so, however, for example, if you’re a busy family where both parents work full time, then it might be better to utilise the skills and expertise of an agent,” Norwell said.

She added that apart from the price premium, enlisting the services of a real estate agent can yield several benefits, including:

  • Legal protections for the home sellers
  • Significant experience in a sales environment as agents must undergo approved education requirements that focus on their professional conduct
  • Proven marketing expertise, including access to experts in their teams who have training in social media, marketing, or advertising
  • Excellent negotiating skills
  • An extensive network of contacts, including buyers waiting for properties to come to market
  • Access to the power of their agency’s selling network

Licenced agents are also required by law to act in the best interests of their client to that ensure they get the best possible price or, at the very least, a fair market value. Agents must follow a professional code of conduct and are bound by the Real Estate Agents Act 2008, which provides extensive protection mechanisms for people who deal with them. If a seller or buyer is unable to resolve an issue with their agent, they can contact the Real Estate Authority, which will their address complaints.

The table below shows the median prices and premium differences between homes sold privately and those sold with the help on an agent across New Zealand based on REINZ’s 2020 data.

Region

Private

Licenced agent

% Difference

Northland

$500,000

$560,000

12%

Auckland

$855,000

$940,000

10%

Waikato

$535,105

$619,000

16%

Bay of Plenty

$575,000

$680,000

18%

Gisborne

$392,000

$476,000

21%

Hawke’s Bay

$507,500

$575,000

13%

Manawatu/Wanganui

$380,000

$450,00

18%

Taranaki

$400,000

$446,000

12%

Wellington

$630,000

$720,000

14%

Nelson

$492,500

$611,000

3%

Marlborough

$450,000

$518,000

15%

West Coast

$250,000

$235,000

-6%

Canterbury

$430,000

$490,000

14%

Otago

$455,000

$475,000

26%

Southland

$300,000

$356,500

19%

National

$585,000

$673,000

15%

Source: REINZ

What other costs are typically involved when selling a property?

However, apart from commission fees, there are several other costs that homeowners need to factor in when selling their properties. These include:

Advertising expenses

To find suitable buyers, homeowners need to market their property. This can set them back around $600 to $10,000, depending on the marketing campaign they decide to run. A standard package, however, typically ranges from $1,000 to $2,000. Marketing costs are paid directly to the advertiser with the invoice addressed to the seller or their real estate agent.

According to Agent Finder NZ, some agents refund the cost of marketing from the commission paid on an unconditional sale. Some also provide most of the advertising expenses complementary.

Administration fee

Agents usually charge an administration fee of around $500. This is on top of the commission, based on a percentage of the selling price.

Full market valuation

A full market appraisal can cost around $700 and is payable directly to an independently chosen registered valuer via an invoice addressed to the seller. The valuation must also be addressed to the seller if they need it as future reference.

Auctioneer fee

Homeowners planning to sell their house at an auction need to pay around $800 as a fee. This is often paid upfront once a listing authority has been signed. There are some listing companies, however, that do not charge auctioneer fees.

One important thing to note is that real estate companies have different structures for charging commission fees and other expenses, including advertising costs. However, the rates are often negotiable, so it is vital for home-sellers to negotiate the fees before signing any agency agreement. Real estate agents must also provide homeowners an accurate market valuation, as this determines the commission fees and other costs that sellers need to prepare for.

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