Are Real Estate Commissions Still Worth $30,000? A Critical Look at How Agents Are Paid
HouGarden New Zealand, 23 September — This article is a commentary and opinion piece by Property Noise. It takes a clear editorial position and is not a neutral news report. HouGarden reproduces its central arguments and figures here because they carry practical relevance for anyone preparing to sell property in New Zealand.
The core of the argument is straightforward. Percentage-based commissions tie an agent's remuneration to the value of the vendor's asset rather than to the amount of work the sale requires. As property values have risen, agents have received an automatic pay increase — funded directly from homeowners' equity — even when the service they deliver has not materially changed.
To illustrate the scale, Property Noise uses a worked example drawn from Settled, the New Zealand government-backed consumer property information website. On a $1.2 million sale, with commissions structured at 3% on the first $400,000 and 2% on the remaining balance, plus an administration fee of approximately $500 — all exclusive of GST — the subtotal reaches $28,500. GST at 15% adds a further $4,275, bringing the total commission bill to approximately $32,775. That figure does not include professional photography, video, signage, online listing upgrades, print advertising, social-media promotion or auction expenses, which are frequently charged separately.
Property Noise frames the practical meaning of that number plainly: more than $32,000 leaving the vendor's equity in a single transaction could represent a new car, a year's rent, a meaningful reduction in the next mortgage, or years of retirement savings.
The piece asks a pointed structural question: does selling a $1.6 million home genuinely require twice as much work as selling an $800,000 home? If not, why should the commission be close to twice as high? Photographs do not cost twice as much. The online listing does not require twice as much administration. The sale and purchase agreement is not twice as long. Yet the vendor pays proportionally more, simply because the asset is worth more.
For context, Property Noise also cites Australian commission structures, noting that percentage-based rates commonly range from approximately 1% to 3.6% depending on the state, city and property value — though those figures are expressed in Australian dollars and are not directly comparable with New Zealand rates. At 2% on an A$1 million property, the Australian commission is A$20,000; at 2.5%, A$25,000; at 3%, A$30,000. Marketing and portal advertising may be additional in Australia as well.
The article challenges the incentive argument that agents frequently make in defence of the percentage model. At a 2.5% commission rate, negotiating an extra $20,000 for a vendor generates only $500 in additional gross commission before the agency split and expenses. Property Noise argues this may give agents a stronger personal incentive to secure a quick unconditional sale than to spend another week fighting for the last $20,000 — not because agents deliberately undersell, but because the incentive structure does not align as neatly as vendors are encouraged to believe.
Property Noise acknowledges that capable agents do provide genuine services: pricing advice, comparable-sales analysis, property preparation, photography coordination, open home management, offer handling, price negotiation, and transaction management through to unconditional. It also notes that agents have real business costs — licensing obligations, professional development, franchise fees, office overheads and periods when properties do not sell — and that the gross commission is split between the agency, the salesperson, and potentially a franchise operation, referral sources and cooperating agents. These facts, the piece argues, do not answer why the fee should be calculated as a percentage of the asset.
The commentary points to technology as a structural change that the percentage model has not yet absorbed. Many buyers today find listings themselves via Trade Me Property, realestate.co.nz and other portals. Artificial intelligence can produce listing descriptions, edit photographs and schedule communications. Property Noise argues that if technology makes transactions faster and more efficient, some of that saving should flow to the vendor — yet many vendors pay the full percentage commission and then fund digital advertising separately on top.
Property Noise sets out four alternatives to the traditional model: a fixed-fee full-service arrangement where the professional fee is known upfront regardless of sale price; a hybrid model combining a lower base fee with a performance payment above an agreed benchmark; limited-service packages covering only defined tasks such as photography, portal listings or negotiation support; and private sale, which Settled acknowledges can save the commission entirely, although the owner must manage advertising, viewings, negotiation and associated risks.
The piece emphasises that a fixed-fee arrangement is not automatically superior — just as a percentage commission is not automatically superior service. The practical difference is that vendors can compare a known cost against a defined list of services before they commit.
On competition law, Property Noise draws a distinction between two categories of historical enforcement and one active matter. Two Hamilton real estate agencies were ordered to pay a combined $4 million in 2020 for price-fixing — a concluded case. In an earlier national matter, agencies received penalties totalling $9.825 million — also concluded. Separately, in September 2025, the New Zealand Commerce Commission, the country's competition regulator, commenced civil proceedings alleging cartel conduct involving significant participants in the Christchurch real estate market. That case is currently before the courts and the allegations have not yet been determined. Property Noise notes that these cases do not make ordinary percentage commissions unlawful, but argues they illustrate why genuine competition, independent pricing and real negotiation matter.
Under New Zealand law, agents are required to explain how commission is calculated and to give sellers an estimated dollar amount based on the appraised selling price. Marketing costs must be explained in writing. Commission and other terms are negotiable before the agency agreement is signed.
Property Noise closes with a checklist of questions it says every vendor is entitled to ask before signing an agency agreement. The full list includes: What is the total commission including GST at the expected sale price? What services are included in that fee? What will I pay separately for marketing? Which online upgrades are genuinely necessary? Who receives the commission and how is it divided? How many open homes and buyer follow-ups are included? Will the agent personally handle the campaign? What evidence shows this service will produce a better net result than alternatives? Will the agency offer a fixed fee? Will it offer a lower base fee with a genuine performance incentive? What happens if the property does not sell? And could commission remain payable after the agency agreement ends?
The piece's conclusion is unambiguous in tone. It concedes that percentage commission is legal, disclosed and negotiable. But it argues that when the fee bears less relationship to the work performed than to the inflated value of the asset being sold, the model deserves to be called what it increasingly appears: outdated, excessively expensive and overdue for disruption. Property Noise's own position is that the industry must now actively defend the value it delivers, rather than assume it.
For Chinese-speaking vendors in New Zealand preparing to sell: the checklist above maps directly onto the questions you should raise with any agency before you sign. Do not treat the commission as a line item too small or too awkward to negotiate. On a typical Auckland or Wellington sale, it is one of the largest single costs of the transaction.
