Hard not to think NZrs are being ripped off by RE Agency commission rates

[donna]

Do we feel hard done by? Or do we just not care enough to push for change?

NZ RE Agents are still charging commission rates that are twice as much as their peers in other countries. So why are we putting up with it? Especially in Auckland where the average home is valued $700K + - and at 4 % rate = $28,000 - compared to Sydney with a rate of 2 % = $14,000

Are our Agents worth twice as much commission? I know it's a crowded marketplace - stands to reason given the whack load of $$$ available. But that's not the vendor's concern.

Maybe we justify the commission fee due to there being no land tax or CGT to pay? Not sure this is a valid reason though and what happens when they apply too?

I'm sure you're all thinking about it - and there may even be a discussion on here but I couldn't find it. Is NZPIF or APIA communicating with REAA on this issue?

cheers,

Donna

[PTILoveYou]

Many agents give cash back to the vendor and buyer under the table already.

So just smarten up, ask for cash backs, and you won't get ripped off as much...

[donna]

...umm I think it needs to come out from under the table Gary - we're not a banana republic.

cheers,

donna

[m2 real estate]

Many agents give cash back to the vendor and buyer under the table already.

So just smarten up, ask for cash backs, and you won't get ripped off as much...

I agree with Donna there is no need to be charging 4%, but I must say agent's giving back cashies under the table etc is really bad and the agents should not be doing this. The REAA is constantly inundated with commission disputes because "cashies" have gone wrong and people didn't live up to their word.

It then ends up in the Herald where we all end up getting a bad reputation. Very unprofessional. If these agents want to have the advantage of offering their clients a more reasonable fee then they should go work for established companies which are out there today and offer a lessor commission to vendors above board.

Also the more people do upfront business with these smaller companies which offer a better rate from the get go instead of hanging on to the corporate agents that offer cashies, the big companies will have no other option but to change their commission structure at some stage as the smaller companies will become bigger over time.

Its the power of the consumer really that is at fault to a degree.

M2 Real Estate
Green Door
Mike Pero
The Property Market

to name only a few are all professional full service real estate companies which charge a fair bit less than the large corporates.

[Orkibi]

its not alot Donna, some agents worth their wight in gold! in some countries seller don't pay commission only the buyer or in some the agent get paid from the buyer and the seller.

[flyernzl]

Its a free country.
No one is compelled to use any particular REA, or actually any agent at all.
Market-place rules.

However - there have been several attempts over the years to set up fixed-fee and/or low-fee agency systems.
None seemed to last very long.

[Davo36]

They don't charge 4% on $700k Donna.

They'll charge 4% up to say $300k or $400k and then 2% thereafter.

But yes I agree, it's still expensive. Especially with property prices going so high.

But as flyernzl says, it's a free market place and new businesses can start up any time charging less. They do from time to time and seem to always go out of business.

[Perry]

Why do they less-costly ones in NZ not survive
if that price structure works OK in (say) Oz?

[Eugene]

Why do they less-costly ones in NZ not survive
if that price structure works OK in (say) Oz?

I have wondered this too. Perhaps the super agents are not going to the less costly agencies.
Two agents from different, reasonably large agencies, have offered 2 percent or a fixed cost. But they weren't super agents.

[m2 real estate]

Why most of the low commission agencies have gone under in the past is because the business model was very similar to the corporate types.

ie they had big overheads which they didn't need simply so they could look flash. Many tried to expand too fast and take over the country within a matter of months.

The other reason I think is because many made the mistake of being cheap and also providing a cheap looking product etc.

Our booklets and marketing material is every bit as good if not better then the big companies and our office is very nice although not huge hence it keeps the lease down. We have a very good location inside the Westfield WestCity shopping mall which is not cheap but affordable for us. We could have done with something really big in a high end street in Parnell but then we would be stretched. Silly.

Many companies also started up at a very bad time a few years ago such as the Joneses circa 2008. Bad time to start any new business especially a real estate agency.

Personally if this market continues on the way it has with the lack of houses out there to sell for agencies I can see one of the big companies folding sooner or later. Perhaps not entirely but possibly getting out of the residential sector for example.

Harveys already has gone under with major debt in the end and got bought out by LJ Hooker some 2 years ago. These guys are not immune they are just very good at hiding it for a long time and pumping more money from the bank.

[Davo36]

Interesting comments M2. I didn't know Harveys were in debt, I just assumed they had been taken over - but not in a distressed way.

[PTILoveYou]

...umm I think it needs to come out from under the table Gary - we're not a banana republic.

cheers,

donna

It's under the table for a reason, because this is an illegal practice.

[Wayne]

The agency Principal must be happy with this practice which says something for the type of agency they run.
Would you trust someone who is happy to condone illegal practices?
They sound dodgy to me.

Does it really happen? I have negotiate commission in the past - particularly when the buyer and seller are close.
I ask the agent to chip in with a reduction in commission and everyone walks away happy - all above the table!

[Maccachic]

Certainly would give me confidence that the agent would work in my best interest.

[Eugene]

In my experience the agents only partially work for the seller.
Twice, once I have started negotiating to buy a property and do due diligence, the agent has ceased to work with other buyers, and other agents in the same agency leave alone too. The agent becomes committed to that sale and negotiating power is transferred to me.
On another occasion, I came back to the agent after two hours having decided to go unconditional on a tender, and the agent expressed displeasure at the inconvenience of an extra trip, eventually muttering that he supposed the seller would like the extra money.
These events happened after the recent new legislation tightening things up for agents. There were two different agencies, both large.