Real Estate Commissions

I just wanted to clear up a common misconception regarding real estate commissions.  I often hear people say that in NZ our commissions are higher than some other countries.  A figure of 4% is often ‘bandied about’ and people complain that this is high.

It’s important to get the facts right.  No real estate company in NZ charges 4% on a typical house sale.  However, a small component of commission is sometimes charged at 4% or 3.95%.  Have a look at this: 

Residential Commissions (including GST)

Selling Price	Barfoot & Thompson	Typical Auckland Fee*
$200,000	$9,000	$9,513
$300,000	$13,331	$13,809
$400,000	$15,581	$17,074
$500,000	$17,831	$19,728
$750,000	$23,456	$25,930
$1,000,000	$29,081	$32,204
$1,500,000	$40,331	$44,752
$2,000,000	$51,581	$57,300
$3,000,000	$74,081	$82,396

Typical Auckland Fee is an independently researched average of rates from selected offices of Harcourts, LJ Hooker, Ray White, Professionals, Remax, Bayleys, Harveys, First National, Premium, Unlimited Potential. 

B&T Residential Sales Commission Rate Calculation  (GST exclusive)
On the first $300,000 of the purchase price* 3.95%
On the balance of the purchase price* 2.0%
Min Fee of $8000 + GST

Independently researched and audited by Chatfield & Co, Chartered Accountants May 2008.  Calculations include GST.

As you can see, with Barfoot & Thompson, on a $1,000,000 house sale the owner pays just over $29,081 incl gst.  As you can see, this is about 2.9% of the total sale price (not the 4% abovementioned). 

To put this percentage into perspective and compare it outside the real estate industry, many mutual funds, superannuation funds etc (investments you may have) charge a similar annual management fee on the total dollar amount you have invested with them.  Check the annual fees on your (relatively speaking passive) Kiwisaver fund and you’ll see what I mean.

Most property managers charge around 7.5% of the rent to manage your investment property.

Whilst many readers will argue (until the cows come home!) that real estate commissions are expensive, when you look at the percentages, they’re not that bad after all.  And if you do some thorough research and find an experienced negotiator to help sell your home, you might “feel” as if you’ve paid no fee because you received such great service and a mind-blowing price.  Isn’t that what you’d expect for, say, $29,081?