Realtor commission: what it is and why it is necessary

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

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

So the best way to understand agent fees is to think of them as a seller’s payment for an agent’s service. Specifically, a seller pays an agent for his knowledge of the real estate market, his time, his marketing approach and his negotiation skills, as well as his ability to select buyers to achieve the best possible sale. Even in cases where a property sells quickly, there is a good chance that it is directly related to the expertise of the agent, which entitles him to compensation.

While sellers who choose to sell their home on their own can save 2-4% on agent fees, they also tend to sell their home below market value, resulting in a greater loss than the cost of an agent’s commission. Instead of foregoing an agent to save on fees, it’s usually better to find a really good agent who will do the work necessary to sell your home for the best possible price. It is also possible to negotiate the agent’s fees in advance. By understanding agent fees and what an agent does to earn their commission, sellers can be more confident that their 2-4% outlay is worth it.

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About Wanda G. Warren

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