Oct 17, 2013
The average time taken by an agent to sell a property is around 25 hrs (its actually 20 hrs but I will say 25hrs to be as fair as I can be.) An REINZ member agent’s fee @ $3.5% on $700,000.00 is on average $24,500.00 plus GST. That equates to an hourly rate of $980.00 per hour. If a $1million property is sold the commission will be around $35,000.00 which is an hourly rate of $1400.00.
I have a friend who is a top level Queens Counsel whose charge-out rate is $650 per hr. I actually don’t know any top level lawyers who charge $980.00 let alone $1400 per hr.
Real Estate commission rates vary throughout the world. In the UK they average around 3%, in the USA 5% and in Sweden 2.5%.In New Zealand rates vary between 2.95 – 4% of the value of the property sold.
So NZ’s commission rates compare with other countries. We are about mid-range. The question is “does that make the rates fair?”
The only way that that question can be answered is to look at the various aspects of the charges and see what risk, expertise and outlay is involved in the obtaining of the fee.
If we go back to the QC mentioned above that person has spent at least 4 years at University (at the cost of tens of thousands of dollars) and another 10-15 years plying their trade before they are elevated to QC. At that level they are recognised by the legal profession as the very best in the business. The clients who they act for are more often than not relying on the QC for legal advice and assistance in matters which are extremely complex, difficult and threatening to either their business or their lives. How the QC deals with the matter can more often than not be crucial to the outcome for the client.
By comparison a real estate agent can commence work after obtaining a basic licence which takes a few months to complete and costs as little as $1600.00 plus GST. At the time they commence work they can earn $980 per hour or much more in the case of higher value properties. The marketing process which is used is usually entirely paid for by the client. There is no risk, or need for experience before they are able to charge these elevated hourly rates. No investment or outlay is required by the agent who obtains the marketing costs from the client. The skill required to place ads on Trademe, in the local newspaper and conduct a marketing programme is unchallenging and can be carried out simply and effectively by most computer literate individuals.
So if the question is again asked - “are the rates charged by New Zealand’s real estate agents fair?” the answer would have to be obvious. It is not fair for real estate companies to charge fees which exceed those charged by most of New Zealand’s top professionals. It is not fair that to engage an
REINZ affiliated real estate company to sell your home in New Zealand you will be asked to pay the price of a brand new family car.
HOWEVER WHETHER ITS FAIR OR NOT WE STILL CONTINUE TO USE REINZ AGENTS TO SELL OUR PROPERTIES.
AT ACRES WE CHARGE A SET FEE FOR THE WORK WE DO. THE FEE IS $10,000 PLUS GST.
That is an hourly rate of $500 an hour. This is a favourable rate at any property value and it is not value dependent. There is no reason for it to be. There is no more work involved in selling a property for $5,000,000.00 than there is in selling a property for $500,000.00. There is therefore no justification for a selling agent receiving a higher fee for selling the higher priced property.
YET TIME AND TIME AGAIN THE NEW ZEALAND PUBLIC SUPPORTS A REAL ESTATE INDUSTRY WHICH:
1. Charges well in excess of what it should charge given relativity with other like industries; and
2. Takes no risk or investment position in selling property; and
3. Sees its members appearing before the Real Estate Authority on an all to frequent basis.
WE AT ACRES AIM TO CHANGE THE WAY PEOPLE SELL THEIR PROPERTIES.
We believe that people should only have to pay a fair fee for selling their property. That they should get a completely professional and price driven service to go with it is a given. What we offer in addition is legal advice (for no extra cost) all the way through the process.
GIVE US A GO. YOU WILL BE PLEASED AT THE DIFFERENCE WE CAN MAKE!!!