You might be wondering why real estate fees are so high if there are no obvious special skills required to be a salesperson? One particular reason why the fees are so high is that there are so many people selling houses these days that if they didn’t charge so much, none of them would make a decent living. In days gone by, when there was a smaller percentage of people selling real estate, the commission that was charged in New Zealand was only about two percent of the sale price. Yet many people in the business got very rich because they sold a lot of houses.

These days, there are too many qualified real estate salespeople trying to sell the limited amount of houses available for sale. The average salesperson would be lucky to sell six houses in a year. Of course, many sell lots more, but then again, an awful lot give up because they are unable to sell enough to make a living. To compensate for this situation, commissions have risen in many cases to around four percent of the sale price plus five hundred dollars plus GST.

This is roughly two and a half times more than the commission was in the old days. And on top of that, most companies will only pay for a very limited amount of advertising. They will probably advertise for free on their company web sites and not charge you for taking photos. But if you want to advertise in newspapers, you will probably be required to pay for that cost yourself.

Another reason why agencies feel they need to charge as much as they do is because for every property an agency is successful in finding a buyer for; they are likely to work on trying to sell several other properties without success. Even in the case of exclusive agencies, which usually last for three months, only about 50% of properties sell within that time frame under normal market conditions.

What you pay in agent’s commissions partly compensates for the time and money spent on trying to sell those properties they didn’t sell. However, most of what you pay goes to compensate for the enormous amount time and money the salespeople spend seeking out properties to sell. Even very successful sales people spend probably less than 20% of their time selling houses. The rest of their time and effort is engaged in prospecting for new properties to sell.

Another reason why fees are so high is that the commissions are generally split two or more ways. Usually the agency keeps about half the commission and the salespeople who list and sell the properties get the other half. Depending on the company policy, usually if one salesperson lists a property but another one sells it, the person who listed it is likely to get about twenty-five percent of the commission and the one who sells it gets the other twenty-five percent.

A few decades ago, to qualify as a real estate salesperson, one needed only to sit a very simple exam that required no more than a few weeks of part time study. Then if he, or she, passed the exam, that person would be qualified to become a licensed salesperson and be working from home. These days, competition is stiff and overheads have skyrocketed because to get ahead of the competition an agency needs to have smart offices in prominent areas and spend a fortune in self-promotion. The cost of this has to come out of commissions.

BETTER TRAINED REAL ESTATE PEOPLE!
These days it takes much more study to become a real estate sales person. One is required to learn the most important real estate regulations and the special rules of the Real estate Institute. They study how to list properties for sale and how to advertise them. They must know their responsibilities when handling other people’s money. They study a few basics on assessing property valuations, a few techniques for negotiating between parties and other such matters.

But even so, what they study is based on nothing more than common sense and fairness. Although the questions in the examination papers they have to sit for, and need to pass, might be difficult to answer, there is nothing a sales person has to do in the normal routine of house selling - apart from writing contracts - that is difficult or that the average property vendors are unable to do for themselves.

Notice that I am talking about sales people, not agents. Agents are the people who manage agencies; these are usually the owners who hire sales people. To become an agent in New Zealand these days you have to do a very comprehensive study course. Agents don’t just handle the sale of houses, they might also sell large buildings, blocks of flats, businesses, forests and farms etc., and might be involved in selling these to people in other countries. They also need to know how to handle staff.

To be able to handle these kinds of things, not to mention the money involved, you need to be fairly well informed. But this is not the case when it comes to selling your own home. The wiser you are, the better, but you don’t need any special skill or knowledge.