How does real estate agent commission work in New Zealand?

How Do Real Estate Agents Get Paid in New Zealand?
Understanding how real estate agent commission works in New Zealand helps you have a clearer conversation with your agent and know what is and is not negotiable.

The commission structure
New Zealand real estate agents are typically paid on a commission basis: a percentage of the sale price, paid by the vendor at settlement. Commission is not paid until the property sells and settlement occurs. Agents work on a no-sale-no-fee basis for the commission component (marketing costs may still apply even if the property does not sell, depending on your agency agreement).

What commission rates look like
New Zealand residential real estate commission rates are not fixed by law and vary between agencies and agents. Typical rates range from 2 to 4 percent of the sale price, sometimes with a tiered structure: a higher percentage on the first tranche of the sale price and a lower percentage on the amount above a threshold. For example: 4 percent on the first $400,000 and 2 percent on the balance. On a $720,000 sale, this would be $16,000 plus $6,400 = $22,400.

GST on commission
Commission is subject to GST (Goods and Services Tax) at 15 percent. A commission of $22,400 plus GST = $25,760 total. Commission figures should always be compared on a GST-inclusive basis to avoid confusion. Confirm whether any quoted rate is GST-inclusive or GST-exclusive before signing the agency agreement.

Negotiating commission
Commission is negotiable in New Zealand. Agents and agencies do not publish a fixed rate. Some vendors attempt to negotiate commission down as a priority; others focus on selecting the best agent regardless of a small commission differential. The most useful perspective: a 0.5 percent commission reduction on a $720,000 property is $3,600. An agent who achieves 1 percent more than a cheaper agent delivers $7,200 more, a net benefit $3,600 in the vendor’s favour.
Focus on competence and track record alongside commission.

The agency agreement and commission protection
Your agency agreement specifies the commission rate and the conditions under which it is payable. Key clause: most agency agreements include a ‘conjunctional’ or ‘introduction’ clause that means even if you find a buyer yourself during the agency period, the agent may still be entitled to commission if they introduced that buyer to the property. This is normally in place for a period after the agency agreement concludes, most often for a 6 month period.
Read your agency agreement carefully and ask your lawyer to review it before signing.

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Paul Sumich is a Whangarei-based real estate professional with local Northland expertise. Find more at paulsumich.co.nz/blog