PHOTO: PEXELS – MART PRODUCTION
Selling a home can generate a commission larger than many people earn in months. In an age of property portals, automated marketing and buyers finding listings themselves, vendors across New Zealand and Australia deserve to know exactly what they are paying for.
Let us be clear from the beginning: charging a percentage-based real estate commission is not criminal.
But when an ordinary homeowner can lose $25,000, $30,000 or considerably more from the proceeds of a single sale—then be asked to pay separately for photography, advertising, online upgrades and an auctioneer—it is easy to understand why some vendors think the cost feels almost criminal.
The central question is no longer whether real estate agents provide a useful service. Good agents clearly do.
The real question is whether their fee should automatically increase by thousands of dollars simply because the house being sold is worth more.
Does it genuinely require twice as much work to sell a $1.6 million home as an $800,000 home?
If not, why should the commission be close to twice as high?
NEW | Access New Zealand’s Ultimate Real Estate Agent Database — 18,000+ Agents & Agencies Included
How $30,000 disappears from a property sale
In New Zealand, commissions vary between agencies and are negotiable. The government-backed Settled website says agents commonly charge an administration fee plus a tiered percentage of the selling price. It gives the example of 3% on the first $400,000 and 2% on the balance. GST is also payable, while advertising is frequently charged separately.
Using that example, the commission on a $1.2 million sale would be:
- 3% of the first $400,000: $12,000
- 2% of the remaining $800,000: $16,000
- An administration fee of approximately $500
- Subtotal: $28,500
- GST: $4,275
- Total: approximately $32,775
That is before potentially adding professional photography, video, signage, online listing upgrades, print advertising, social-media promotion or auction expenses.
The exact amount will depend on the agency agreement, negotiated rate and services included. But the example exposes the scale of the transaction.
More than $32,000 can leave the vendor’s equity following one successful sale.
That is not loose change. It could represent a new car, a year’s rent, a substantial reduction in the next mortgage or years of retirement savings.
From 101 Offices to a Fraction of Its Former Footprint: What Happened to LJ Hooker in New Zealand?
Australia has the same uncomfortable question
Australian commission structures differ between states, cities and regional markets. Percentage-based commissions commonly sit somewhere between approximately 1% and 3.6%, although the rate varies substantially by location and property value.
At 2% on a A$1 million property, the commission is A$20,000.
At 2.5%, it is A$25,000.
At 3%, it is A$30,000.
Again, marketing and portal advertising may be additional costs.
Victorian consumer guidance confirms that an agent’s authority sets out the commission and associated arrangements. An exclusive authority can also entitle an agency to commission in circumstances where the owner ultimately sells the property personally.
Western Australian consumer guidance explicitly reminds sellers that commissions, advertising and other charges can be negotiated.
The number may differ on either side of the Tasman, but the fundamental issue is identical: the traditional model ties remuneration to the value of the asset rather than transparently pricing the work required.
What does the commission actually pay for?
A capable agent may provide genuine value through:
- Pricing advice and comparable-sales analysis
- Preparing the property for market
- Coordinating photographers and marketing
- Managing enquiries
- Conducting open homes and private viewings
- Following up prospective purchasers
- Handling offers
- Negotiating price and conditions
- Communicating with lawyers, brokers and buyers
- Managing the transaction until it becomes unconditional
An experienced negotiator may also achieve a price that a private seller could not.
Those services have value. Agents have business expenses, licensing obligations, professional-development requirements, franchise costs, office overheads and periods in which properties do not sell.
The salesperson does not necessarily pocket the entire commission either. The gross fee may be divided between the agency, salesperson, franchise operation, referral sources and cooperating agents.
But those facts do not answer the critical question.
Why should the cost of these services be calculated primarily as a percentage of the owner’s asset?
If the work involved in selling two similar homes is broadly comparable, why might one vendor pay $20,000 while another pays $40,000?
Rising property values delivered agents an automatic pay rise
Percentage commissions have an extraordinary feature: they increase when property values rise, even if the service remains largely unchanged.
When a home that was once worth $500,000 becomes worth $900,000, the agent’s percentage-based fee rises automatically.
The agent does not necessarily conduct twice as many open homes.
The 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 can pay thousands more.
Property inflation has effectively delivered the industry an automatic pay increase funded from homeowners’ equity.
Most other professionals cannot charge this way. A lawyer does not normally double a fee because a client’s bank balance has doubled. A mechanic does not charge a percentage of the car’s resale value to complete the same repair. A photographer does not automatically charge twice as much because the house being photographed is more expensive.
Why should the sale of property be different?
Technology has changed who finds the buyer
The percentage model developed when agencies controlled much more of the selling process.
Buyers visited agency windows, read newspaper advertisements and relied heavily on salespeople to identify suitable properties.
Today, many buyers find homes themselves.
They use Trade Me Property, realestate.co.nz, realestate.com.au, Domain, agency websites, email alerts and social media. They compare recent sales, view estimated values, inspect satellite imagery and receive notifications the moment a new listing appears.
Artificial intelligence can now produce listing descriptions, edit photographs, schedule communications, qualify enquiries and assist with administrative tasks.
None of this eliminates the need for human expertise. Negotiation, disclosure, judgement and transaction management still matter.
But it should make consumers question whether the old percentage deserves to survive unchanged.
If technology makes each transaction faster and more efficient, some of that saving should reach the vendor.
Instead, many vendors pay the percentage commission and then fund the digital advertising separately.
The incentive argument deserves scrutiny
Agents sometimes defend percentage commissions by saying the structure motivates them to achieve a higher price.
The mathematics is less convincing than the slogan.
Suppose an agent earns 2.5% of the sale price. Negotiating an additional $20,000 for the vendor generates just $500 in additional gross commission before the agency split and expenses.
The vendor receives most of the gain—which is appropriate—but the agent may have a stronger personal incentive to secure a quick unconditional transaction than to spend another week fighting for the final $20,000.
That does not mean agents deliberately undersell homes. It means the percentage model does not necessarily create the perfectly aligned incentives that consumers are encouraged to imagine.
A carefully designed performance fee could provide a stronger incentive: a reasonable fixed amount for completing the sale, with a larger percentage applying only to the amount achieved above an agreed benchmark.
Fixed-fee and hybrid services deserve a fair comparison
The alternative is not simply “use an agent or sell it yourself.”
The market can offer several models:
Full-service percentage commission
The traditional agency handles the process and charges a percentage when the property sells.
Fixed-fee full service
The vendor knows the professional fee at the beginning, regardless of the final sale price.
Hybrid pricing
A lower base fee covers the standard service, with a performance payment applying above an agreed result.
Limited-service packages
The vendor pays separately for defined services such as photography, portal listings, open homes, negotiation or contract support.
Private sale
The owner manages the sale directly, using lawyers and other specialists where required.
New Zealand’s Settled guidance acknowledges that selling privately can save the commission, although owners must manage advertising, viewings, negotiation and the associated risks themselves.
Fixed-fee does not automatically mean better, just as percentage commission does not automatically mean better service.
The important difference is that consumers can compare a known price with a clearly defined list of services.
Vendors are entitled to demand answers
In New Zealand, agents must explain how the commission is calculated and give the seller an estimated dollar amount based on the appraised selling price. Marketing costs must also be explained in writing. Commission and other terms can be negotiated before the agency agreement is signed.
Every vendor should ask:
- What is the total commission, including GST, at the expected sale price?
- What services are included?
- 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?
- 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?
- Could commission remain payable after the agreement ends?
If an agency expects a vendor to sign away $30,000, it should be able to answer every one of those questions without defensiveness or vague talk about “premium exposure.”
Competition concerns cannot be dismissed
New Zealand’s real estate sector has previously faced serious competition-law enforcement.
In 2020, two Hamilton real estate agencies were ordered to pay a combined $4 million for price-fixing. In an earlier national case, agencies received penalties totalling $9.825 million. In September 2025, the Commerce Commission also began civil proceedings alleging cartel conduct involving significant participants in the Christchurch real estate market. Allegations in current proceedings remain to be determined by the court.
These cases do not mean ordinary percentage commissions are unlawful.
They do demonstrate why strong competition, independent pricing and genuine negotiation matter.
In Australia, scrutiny has also focused on the power of property portals and the choices available to agencies and vendors. That matters because commission is only one component of a selling system in which owners can also face substantial advertising and portal expenses.
A challenge to the industry
Property Noise invites major agencies in New Zealand and Australia to answer five straightforward questions:
- Why is percentage commission still the fairest pricing model?
- Why should the fee rise automatically with the value of the property?
- What does a vendor paying $30,000 receive that a vendor paying $15,000 does not?
- Would your agency publish a full breakdown of where the commission goes?
- Will you offer vendors a genuine fixed-fee or hybrid alternative?
There will be agents who can justify their fees.
A brilliant agent who protects a vendor from a poor deal, creates genuine competition and negotiates an additional $50,000 may be worth every dollar.
But the industry should prove that value, not merely assume it.
The Property Noise view
Selling a home is often the largest financial transaction a person will ever complete.
A commission of $20,000, $30,000 or $40,000 should never be treated as an almost invisible deduction from the deposit.
It should be scrutinised with the same seriousness as the sale price itself.
The industry’s answer cannot simply be: “That is how commissions have always worked.”
Technology has changed. Buyers have changed. Advertising has changed. Property values have changed. Consumer expectations have changed.
The pricing model must now defend itself.
Percentage commission may be legal, disclosed and negotiable. But when the fee bears less relationship to the work performed than to the inflated value of the asset being sold, vendors are entitled to call the model what it increasingly appears to be:
Outdated, excessively expensive and badly overdue for disruption.