NZ real estate commissions
When casually asking people recently how much they would expect to pay real estate agents to sell their home, I was surprised to find a variety of answers. I should point out I was looking for numbers as answers, not just the predictable answer of "too much"!
I was equally surprised when the article on the influx of agents into the industry recently quoted a commission range from 3.5% to 5% of the sale price.
So I set out to seek to get some facts on agent commissions. What I found was that no company charges 5% - but the fees charged do vary significantly. Most agencies seem to charge around 4% on the first $300,000 of the sale price and then around 2% on the balance with often an admin charge and of course GST applicable to all commission charges.
What I found most surprising though is just how difficult it is to find out what companies charge via their websites.
Of the larger groups only Barfoot & Thompson provide the fees in detail. They provide a table showcasing the price advantage they offer as compared to the other major groups, this is due to the fact, they state that they own most of their branch premises. Searching online across all the other major groups provided literally no details of commission fees. I did however find that the newest entrant into the market Mike Pero not only states their fee structure on the site of 2.95% up to $390,000 and then 1.95% for the balance plus GST, but it also has a handy calculator to allow anyone to compare Mike Pero commission with the fees of the major companies. Thanks to this feature of the Mike Pero site I developed this chart below:
As I stated the commission charged and presented in this chart for the other groups is sourced from the Mike Pero website, as each of the other companies do not provide a commission structure online then it is not possible to separately validate those commission fees.
The blue bars represent the commission charged by each company for a property sold at the current median price across NZ (REINZ Stratified price $385,275) with the red bars representing commission payable on the current price across Auckland (REINZ Stratified price $547,375) . All commission charges include GST.
These commissions are expressed as $ amounts as is now required by the Real Estate Agents Authority who stipulate that a listing agent must provide you with an estimate in dollar terms of the commission you would have to pay if your property sold at the appraised price.
The commissions are surprisingly variable with a range at the NZ national sales price from just over $13,600 to $18,300 and in the case of Auckland sales price from just over $17,300 to nearly $25,000.
It is valuable to put these commissions into perspective when you consider the appreciation or lack of it of property prices across the country over the past 5 years. In that time period since August 2007 the average NZ house as measured using the REINZ stratified median price, has gone from $377,425 to $385,275 - an increase of just $7,850, the commission on the sale of that house today would be swallow up all of that appreciation. In the case of an Auckland property which at the stratified mean price, has risen from $510,400 to $547,375 - an increase of $45,975, then in this case the commission would be covered by the appreciation but could consume more than half of it.
Now before I get a barrage of comments from those within the industry I thought for the sake of completeness that I would also highlight some alternative operators which are all licensed real estate companies who charge very different rates.
In Auckland The Property Market charges 2% - a flat commission irrespective of the sale price.
In Christchurch Total Realty charges 1% as a flat commission rate
There is also a unique online real estate company 200Square which charges $4,500 as a flat fee - no commission
This is by no means an exhaustive list of alternative providers of services in the real estate market, I just happen to know of these companies and felt the need to include their details. I do not at this stage propose to analyse their services save for to highlight their consistent focus to the role of online in the process of marketing property for sale.