Real Estate Agent Commission: What It Is And Why It’s Necessary

In New Zealand, real estate agents can earn anywhere between 2 and 4% commission on the sale of a property. A growing trend is for sellers who find this fee excessive to attempt selling their properties themselves. But, before going this route, it’s important to keep in mind what an agent does and what the agent fees are for.

Any business has running costs. For real estate agencies, these costs are paid for through the commissions that their agents earn, with the total being split between the company and the individual agent. Some recurring expenses for agencies include salaries, administration fees, utilities, and marketing. Without real estate agent fees, agents cannot offer effective services to their clients.

So, the best way to understand agent fees is to see them as a seller’s payment for an agent’s service. More specifically, a seller pays an agent for their property market knowledge, time, marketing approach, and negotiation skills, as well as their ability to screen buyers to make the best sale possible. Even in cases where a property sells quickly, chances are it’s directly related to the expertise of the agent, which entitles them to compensation.

While sellers who opt to sell their homes themselves might save on the 2-4% agent fees, they also tend to sell their homes under market value, leading to a greater loss than the cost of an agent’s commission. Instead of foregoing an agent to save on fees, then, it’s generally better to find a really good agent who will do the necessary work to sell your home for the best possible price. It’s also possible to negotiate the agent’s fees upfront. By understanding agent fees, and what an agent does to earn their commission, sellers can rest easier that their 2-4% expense is well worth it.

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