How much do real estate commissions cost in New Zealand?

Updated 23 May 2024

The real estate market in New Zealand has been volatile since the pandemic. Many have been turning to mortgage professionals for help, but some hold back because of real estate commissions. They either don’t understand why this fee exists or feel that agents don’t deserve it.

While it is true that hiring a realtor will cost a seller extra dollars for their fees, the hassle-free transactions, assurance, and other benefits can tip the scale to their advantage. Agents, feel free to send this along to clients who have questions about this fee so they can see why they exist.

Understanding real estate commissions

Let’s say that as a seller, you’ve decided to engage the services of a real estate agent or realtor. On the flip side, you might be a freshly minted real estate agent or realtor yourself. Whichever the case, it is imperative to understand what real estate commissions are if you want to thrive in the property market.

Real estate commissions are fees paid to real estate agents or realtors in exchange for their services in facilitating the sale of a property. Like any other professional that you hire, you should pay them for whatever service or product they provide while promoting your interests.

Typically, real estate commissions will go to the agency that the realtor is working for. Yet there are some real estate agents that work solo. Either way, the commission will be based on the percentage of the sale price. This percentage will then be based on the agreement of the client and realtor.

Average real estate commission rates in New Zealand

For residential properties, it is common for the average real estate commission rates to be based on a 2.95% to 3.95% percentage range. In that scenario, the percentage depends on the sale price of the property up to the initial $400,00 to $500,000 of the total amount. For the remainder of the sale price, the commission percentage will be reduced to around 2% to 2.5%.

For some real estate companies, their commissions range from 2.5% to 3.5% of a sale price for the initial $400,000 and above. Others have different percentage ranges for their commission rates.

NZ Adviser prepared a table below to help sellers work out how much commission they need to pay depending on the sale price of their homes. This sample computation is based on the first $450,000 at either 2.5% or 3.5% commission percentage:

Image caption: Approximate real estate commission fees

Can you negotiate real estate commissions in NZ?

Yes, real estate commission rates are negotiable. These values must be agreed on before the seller signs the agency contract. This binding agreement prepared by the real estate company will define every service that the client can expect from the realtor.

Aside from real estate commissions, there are other fees that may be negotiated before the prospective client signs the agency agreement with a real estate company. These charges are also dictated by the real estate companies preparing the contract. As such, it is vital to read the entire agency agreement before signing it to avoid missing these crucial details. Below are some of the fees that can be negotiated:

• charges for marketing and advertising services
• terms and conditions written in the agency agreement
• the sale price range based on the property appraisal
• other fees and expenses involved in the transactions

Other general charges to expect

• auctioneer fees (if client picks this mode of sale)
• administration fee
• photography costs
• video production charges
• fee for aerial pictures (different from photography costs)
• full market valuation
• real estate advertising fees

The numerical figures and other information used in this article are sourced from real estate agent vetting service, Agent Finder New Zealand.

Factors influencing commission rates in NZ

The commission rates of the realtor are most influenced by how much the property costs. However, there are many factors that determine the commission rates charged by real estate agents or realtors in New Zealand. These include:

Location

Commission rates can be on the higher or lower end of the percentage range depending on the region or city where the property is located. In cities like Auckland and Christchurch, the demand and prices of properties are generally higher than the national average. In turn, commission rates may be slightly lower due to increased competition among agents. 

Property type

The type of property being sold can also impact the commission rate. Residential properties like flats and houses have a distinct market as opposed to rural areas and farms. This means different commission structures due to unique market dynamics that are associated with each property type. 

Real estate agency

It is common for established and reputable real estate agencies to command higher commission rates. They can argue that this is because of their expertise, resources, and wider reach. Every real estate agency can have their own structures and rules when it comes to their commission rates. 

Property value

The property value not only influences the realtor’s commission but dictates it. Typically, higher-priced properties tend to have lower commission rates on a percentage basis. Still, the absolute commission amount received by the realtor would still be substantial due to the high property price. 

When should real estate commissions be paid?

Most of the time, real estate commissions are paid after the signing of a sale and purchase contract and once the buyer has paid the deposit for the amount. As for the other real estate transactions charges, these can be paid together with the commission once the sale has been finalised. These fees can also be paid as soon as the client signs the agency agreement with the real estate company.

Want to learn more about being a real estate agent in New Zealand? Check out this video on a day in the life of a real estate agent in the country:

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Choosing the right real estate agent for you

Now that you understand what commission rates are, the next step is to be certain that your prospective realtor is compatible with your goals and needs. There are numerous real estate agents in New Zealand and being smart with your choices may prove useful. When screening these agents, see if they tick the boxes for these three essential criteria:

Experience

Most property sellers engage the service of the real estate agent that their friends or family recommend. You can even search for a real estate agent online.

In both situations, the deciding factor is experience. Here are some questions to ask before engaging the services of a real estate agent:

• Does the realtor have the much-needed knowledge to put your type of property on the market and make a promising sale?
• Do they have a track record of success in selling the kind of house, flat, farm, or lifestyle block that you own?

Your answers should be positive to guarantee success. If not, it might be better for you to look for other realtors that are more familiar with your specifications and needs.

Licence

A real estate agent must be authorised to conduct real estate activities as a realtor. To do real estate agency work, a realtor must hold a valid real estate licence.

Any realtor can claim that they are an experienced professional in the field. Nevertheless, having the expertise won’t make any difference if they do not have a licence. A revoked licence is also no good. Engage the services of a realtor only if they have a licence to present.

Obligations

Real estate agents must abide by a professional code of conduct, bound by the Real Estate Agents Act 2008. This law provides a wide array of protection clauses for clients and others who deal with realtors. If a seller or buyer is unable to resolve an issue with their agent, they can contact the Real Estate Authority (REA), which will address their complaints.

Below are some of the obligations that a real estate agent must provide when appraising a seller’s property:

• a comparative market appraisal
• a recommended method of sale
• a marketing and advertising plan
• an itemised summary of all expenses

Here are more tips on finding a good real estate agent from one of New Zealand’s top realtors.

Future trends in real estate commissions

Just like other figures in the real estate industry such as property prices and mortgage rates, real estate commissions will keep on fluctuating.

Regardless of the downturns and constant movement of these rates, the country’s real estate market remains a buyers’ market. This means that with the right real estate agent to guide them, sellers might be able to see positive results in their real estate investment sooner than later. To get the most value for your money, speak to one of the best mortgage advisers in New Zealand and  how they can help you.

What’s your take on real estate commissions – are the rates fair? Share your insights in the comments section below.