Real Estate Commission; your complete guide
This is your complete guide to real estate commission and fees in New Zealand.
In this guide we will cover
- Commission structure overview
- Commission structure details on;
- Fixed price commission
- Fixed percentage commission
- Tiered Commission
- How much you should expect to pay
- Quick reference table
- How to compare commission
- How to calculate real estate commission
Real Estate commission works like any other service, a professional is paid to do a task. In this case, the professional is marketing and selling property return the professional takes a cut of the sale price. Although there is a trend starting to emerge of homeowners in NZ looking to sell their own home via private sale, the majority of people use agents to get the job done. For this service, there is generally a cost in the form of commission.
Real Estate Commission Structure overview
In New Zealand, there is no restriction on the way a commission can be structured. We sometimes see some creative structures that come through new marketing initiatives or agents trying to give all involved the best possible deal. This can be seen by the amount of new entrants to the real estate market in the last few years with agencies like Tall Poppy and Arizto presenting new and creative ways to attract sellers. Although these new companies have gained a foothold in the New Zealand Market, it’s the larger, more traditional agencies who still dominate. You might be surprised to find that almost all agencies give their agents the freedom to offer different commission structures to vendors. This gives sellers the ability to request different structures and taylor an agency agreement to suit any given situation.
With the combination of new entrants with new ideas and traditional large agencies there can be confusion when it comes to investigating how much employing a real estate agent will cost. Getting a basic idea on your cost expectations and what structure you think might work best for your sale can go a long way ensuring you get both the best agent to sell your home for the best price.
To help sellers get to know the basics on how commission structure works and what to expect Aframe have outlined the three most common structures and expected costs. The following figures are based on our own research and have been generalised for the purpose of helping sellers understand real estate commission in New Zealand. The only true way to know how much commission an agent charges is to ask them – you can do this by posting your property now
Commission structures generally take the form of just a three different types;
Fixed price agencies such as Tall Poppy and Arizto are becoming more popular in New Zealand especially as house prices rise. An agent or agency who offers a fixed price generally will quote to cover the commission piece of your costs only. Expect to pay marketing and other fees on top. We have seen a number of fixed price agencies come and go over the years, however the current batch look like they are here to stay. Because of the simplicity that fixed price agencies bring, they can then get creative with the rest of their fees structure. You might see all inclusive marketing packages, or sliding scale commissions based on the sale price.
Expect Fixed Fee Agencies to typically charge;
- $200 – $800 base fee for some
- $8,000 – $12,000 commission
This is the second most common structure to tiered commission. You may notice agencies, especially in the south island, offering flat percentage fees of 1.5% or 2%. Rates like these present a compelling reason to request quotes, however leaves little room for negotiation if the entire premise of a company is built around a fee.
Be aware that sometimes flat percentage structures include a base fee to cover costs, or a larger base fee that makes up part of the commission. For example, the base fee might be as large as $2000 but then the commission as low as 1.25%
Expect Fixed Fee Agencies to typically charge;
- Base fee – $200-800 for some
- Percent of sale price commission ranging from 2.0% – 3.5%
The most common form of commission and the most likey quote you will receive on Aframe is the tiered commission structure.
This is the structure that all major agencies use and most agents prefer to offer. It’s reasonably simple and is what sellers are used to seeing and therefore what sellers want. Most often, the first large chunk of house value is at a higher percentage, then the remaining is at a lower percent.
It has been pointed out before that this structure can not be in the best interest of the seller as the incentive for an agent to get more for the property diminishes as the price goes up. In the current market, most vendors are not concerned about this as an agent’s reputation and reviews should speak volumes for their motivation.
Expect tiered commission agencies to typically charge;
- 2.5% – 3.5% for first level, then 1% – 2% for the remaining.
How much commission should I expect to pay
The real answer here is.. it depends. Unfortunately without knowing about your property and the active agents in your area, giving an accurate expected commission range is tough. Factors such as too many or too few agents within an area, market heating up or slow down and the time of year can all affect the level of commission an agent can give.
Using the following table as a quick reference can be a helpful start. For a $600,000 home, the difference between 2% and 3.5% commission is $9,000 and those numbers only get bigger as home values increase.
Real estate commission table
Agent and Agencies Commission Split
One thing to keep in mind when you these sometimes eye-watering commission numbers is that agents have costs too. Often real estate agents will have to pay their own commission of sorts. Agencies, particularly the larger ones, can charge an agent a significant percentage of their commission earnings for the right to be a part of their agency. The amount an agent pays to their agency can change depending on the agent’s experience, location and agency. Keep this in mind when comparing agents and making your selection.
How do I compare real estate agents Commission?
Our research shows that most agencies advertised rates range from 2 to 3.5 percent depending on the region, property type and market conditions. With such a broad range of options, it’s tough to get a direct comparison of how much it costs to sell your home. Because different market conditions, location, property type and time of year can effect the commission that is offered, it can be tough to know what commission is best.
That’s why at Aframe, we have created a marketplace where you can directly compare agents who want to sell your home. You can quickly look at what agents have decided to send you a quote and view the bottom dollar without having to calculate commission structures. We do all that for you.
Calculate real estate commission
Calculate your own real estate commission by using the Aframe commission calculator. It can be useful to adjust commission using this calculator if you are in the early process of finding an agent or in a negotiation phase.
Real Estate Agent Commission Calculator
Fill out this form to help calculate your total commission