If you’re selling your house – or thinking about it – here’s a wee tidbit of info that might interest (or depress) you… Here in New Zealand, real estate commission fees are generally quite a lot higher than countries such as the US, UK and Australia.

How much higher? Well, by our calculations, the real estate commission fee on a $500,000 property in Auckland is nearly twice as much as a $500,000 home in Sydney. Yikes!

Can’t quite believe what you’re reading? Here’s the breakdown, using a typical commission charged by well known local firm, Bayleys. On a $500,000 home in Auckland, Bayleys’ fee would be $23,575 (including GST). In Sydney, where an average commission fee is 2.2%, the commission would be $12,100 (including GST). If you’re selling your house in New Zealand, that’s an extra $11,475 going to the real estate agency, rather than into your back pocket.

Of course, this begs the question… What’s so different about selling a home in Auckland, that a premium of nearly 50% on real estate commission is required?

The answer to that is… nothing. Yes each market has its intricacies but, fundamentally, selling your house in Auckland is no different to selling your house anywhere else in the world… It’s just more expensive from a real estate commission perspective.

Here’s why. Most real estate agencies in New Zealand are set up in a way that incurs a heap of running cost. Leasing a branch on the high street, operating a traditional trust account, providing desk space, phone lines and stationery for contracted agents and having admin staff using antiquated paper-based processes and accounting systems are all significant operating expenses.

Industry standard commissions are set up to support these running costs; the thing is, a high street location and a traditional trust account aren’t going to help you sell your home any faster, or for any more money.

Another point to consider is that New Zealand’s real estate industry has very few barriers to entry and gaining the requisite qualification is not overly onerous. With the promise of vast commission riches, it’s a tempting career option for the uninitiated. The reality is there are far too many salespeople in relation to properties for sale. There are between 10,000 and 12,000 real estate salespeople in New Zealand, and around 67,000 transactions – that’s somewhere between 5 and 7 sales a year per person… A long time between drinks if you’re not earning a decent whack of commission for each sale.

Finally, consider that in New Zealand most houses are put on the market with little assurance about their structural integrity or value. Putting the onus on buyers to discover flaws with a property decreases the number of successful transactions, creating a lot of hard work on the agent’s part for no reward. This is a key reason why roughly a third of real estate listings in New Zealand don’t sell and, unsurprisingly, is factored into traditional commission fee structures too. In other words, a standard commission fee includes a buffer to cover the high number of properties that don’t sell. If the current approach was reversed (i.e. if vendors obtained a building inspection upfront and shared this with buyers), this would reduce the workload on real estate agents and enable lower real estate commission fees to be charged.

If you ask us, the current real estate model involves a huge amount of wastage and inefficiency – much of which could be significantly reduced (or altogether avoided) by embracing new technology and smarter systems.

How do we know this? Well, because we’ve been selling houses in Auckland for the last three years using a model that enables us to charge just 2% commission. By way of example – our offices aren’t on the high street and we use world-class online solutions to manage our trust accounts, administration and salesperson support.

Using this approach, we not only save our clients thousands of dollars in real estate commission fees, we also consistently achieve results on par (or better!) than agencies with a traditional set up and commission fee structure.

We like to say that we’re out to reinvent real estate, put the cat among the pigeons and generally shake up the consumer experience of this industry… But, at the end of the day, the bit that will really make a difference to you as a vendor is that we can sell your house just as fast, for just as much (or maybe a bit more)… we simply cost less.

So, if you’re in the market for a real estate agent and you don’t want to pay for a bunch of running costs that won’t benefit you in any way, shape or form, give us a bell. You can also compare our real estate commission fees to the industry standard on any sale price here.

Real estate commission fees around the world:

Australia

We may have the better rugby squad, but – on the whole – our cousins over the ditch pay much less than us when they sell their homes. Percentages vary from state to state, but in urban areas of New South Wales real estate commission fees generally sit between 2 % and 2.5%. Likewise, in urban areas of Victoria the highest commission percentage is 2.5%. On a $500,000 mortgage, a 2.5% commission equates to just $12,500.

UK
In the competitive UK market, real estate commission fees range between 1.6% and 2.5% – often with some marketing expenses included. What’s more, a host of new, online real estate agencies are charging fees as low as £50 to help vendors handle the sale of their property themselves.

USA
Selling your house in the land of the free? You can bank on paying out between 2.5% and 3% of your sale price in real estate commission fees. Having said that, the US real estate market does feature ‘buyer’s agents’ who charge an additional commission (generally also between 2.5% and 3%); this means a vendor could ultimately pay up to 6% in real estate commission fees.

About The Property Market

The Property Market is a full service real estate agency built to deliver a better experience for buyers and sellers. Think real estate, only reinvented.

– Our Ponsonby real estate agents operate within a 20 minute radius of Freemans Bay.
– Our real estate agent commission rates are innovative and competitive.
– Our focus on customer service is second-to-none.
– We offer a range of clever online marketing solutions, including a mobile-friendly, personalised website for your property.

Check out our latest listings and, if you’re thinking of selling your house, give us a call.