How much does a real estate agent cost?

Posted by Danny Bates on June 28, 2022
Danny Bates
Find me on:

Real Estate Agent Fees

Choosing a real estate agent is a daunting task because it plays a big role in how successful the sale of your property is. They’re key to achieving the best outcome and attracting excellent offers for your property.

But there’s a lot of uncertainty around their cost and a common question we get is ‘how much are real estate agent fees?’ Sadly, it’s not always a simple answer. That’s why we’ve put this blog together to give you a clear understanding of the many variables at play, what you could expect to pay, and what you should get in exchange. 

Real estate agent commission fees

New Zealand real estate agents tend to charge a tiered commission for the sale of a property. In other words, they charge a fixed percentage up to a certain amount, and then a different rate for anything above that. For example, you might be charged 3% for the first $400,000 of the sale price, and 2% after that. 

However, real estate commissions do vary and they are also often negotiable, which gives you some control over the situation. Before you start to work out the costs you’ll need to be sure of exactly what you’re paying for, and whether it meets your needs. That means you need to ask questions and discuss options before the agency agreement is signed and before you’re locked into any fees. 

Having a real estate agent on commission is a win-win for both of you. If the agent is getting a percentage of the final sale price then they’ll push to get the highest offer possible, to increase the amount they receive. On the other hand, real estate agents that charge a flat fee per sale have no motivation to fight for the best price possible. Instead, they may be motivated to sell the house quickly, for as low a price as possible, to get their fee and move on to the next sale.

What am I paying for?

When paying a commission for a real estate agent, it is worth knowing exactly where that money is going. It’s generally true that you get what you pay for with real estate agents in terms of professionalism, buyer networks, and track records — so going for the cheapest won’t always be the best! You’ll need to ask prospective agents about their processes to ensure they are a good match for you and can deliver the expertise and experience needed to sell your property. 

At this point, you’ll need to discuss the anticipated sale price and any administration and marketing fees. This is an agent's chance to demonstrate their ability to sell houses for a good price and showcase their recent successes in the market. This discussion should reassure you that the agent is capable, knowledgeable, and qualified to successfully sell your property.

Marketing and advertising costs for selling a house

Before you sign any agreements, it’s important to discuss the marketing costs you should expect to pay. Vendor Paid Advertising (VPA) refers to the advertising done to sell your property, which you will be paying for, as discussed with your agent. 

Your VPA costs will depend on: 

  • The marketing channels you and your agent decide to use. 
  • Quality of the photography and videography.
  • If the house is being professionally staged.

These costs will need to be paid regardless of whether the house sells, which is why it’s so important to consult with your agent before committing to these costs. A good agent will be able to explain why certain advertising channels are best suited to selling your property, and which advertising tactics will be most effective. This way you’ll be certain your money is invested in the best possible strategy to sell the property and get the best return. 

Remember that these are the assets most prospective buyers will see. They’re potentially scrolling through dozens of properties, so how will yours stand out? A few extra dollars spent here may make the difference come sale time as attracting multiple offers could help you achieve the best price possible for your home.

Many real estate agents attract prospective buyers with free marketing packages, or ‘upgrades’ to help sell your home. Ask for details on exactly what’s included and compare that to other real estate agents. ‘Free’ sounds good, but if it means you’re getting less is it really worthwhile when selling the most valuable asset you own?

Administrative fees

Most real estate agents will charge an administration fee of around $500 which pays for all the baseline costs of listing a property. This can include anything from licensing fees to legal services to general paperwork. This fee won’t vary much from agent to agent, in fact, a lower fee might be a sign that the agent isn’t as experienced as they claim, or they’re picking up the cost elsewhere. A lower administrative fee might translate to a higher commission percentage, for example. With that in mind, you can ask your agent exactly what’s included in the fee, and discuss any options you might have. It’s important to remember that a real estate agent is working for you, and a good one will demonstrate that by being cooperative and transparent. 

How to take advantage of the current multi-offer market?

Ultimately, the amount a real estate agent charges is less important than their success rate. Paying more for an experienced real estate agent can bring significant gains upon the sale of the property, and is worth the extra investment. Remember, this is a very important transaction and it’s more important that you get the best result from the sale than make a temporary friend. If you can get the best real estate agent and also get along with them then that’s a bonus! With the right agent to guide the sale, you can ensure the right buyers are engaged, and the full market rate is paid. 

To put it simply, an agent’s fee should reflect their ability to sell your house for what it’s really worth. By paying a higher commission for a skilled agent, you might get a much better sale price in the long run, which means more money in your pocket. Just be sure to choose your real estate agent wisely by vetting their competence, and recent listings.

Questions to ask your real estate agent:

  • Are you licensed with the Real Estate Institute of New Zealand (REINZ)? You can verify this here.
  • Can you show me your sales track record? 
  • How have your listings performed in the last 6 months? 
  • Are you familiar with this market and property type? 
  • What extra costs should I expect to pay? (Such as property advertising costs and administrative fees).  

By asking these questions you’ll be able to gauge exactly how prepared your real estate agent is, and how likely they are to get the best price for your property. At this point, you can negotiate with them to find a price that fairly reflects their competence.

When to pay a real estate agent

Usually, the commission and fees are paid to the real estate agent when the sale goes through. When the purchase agreement is signed between the buyer and seller, there is often a 10% deposit paid into a trust account. In most cases, the agent will take their commission from this, and the rest goes to you. 

Choosing a real estate agent isn’t easy and, like anything, it pays to do your research. Meet with several different agents and ask for specifics on what’s included, and what isn’t. You may only get the one chance to sell your property right so look past the charm to ensure that you’re getting someone that’s going to work hard for you.

For an idea of what you’d get by partnering with us, you can request a free appraisal with McDonald Real Estate. A member of the team will visit your property to assess key features of the home, recent sales in the area, the pros and cons of selling right now, and the property’s position in the local market. Our appraisals are honest, reliable, and obligation-free so you can get an unbiased assessment of your property. 

Get free resources for selling your home ›

Topics: Selling a house

With Taranaki's largest property management portfolio. We share our knowledge and expertise within the industry with the aim to help better educate the importance of property management right here in Taranaki

Subscribe Here!

Recent Posts