PHOTO: The Commission Model Nobody Wants To Question. FILE
Imagine walking into a supermarket and being charged a percentage of your grocery bill just because the items cost more.
Or imagine your lawyer, accountant, builder or dentist charging more simply because your house happened to increase in value.
Sounds ridiculous?
Yet that’s exactly how much of the real estate industry operates.
For decades, homeowners have accepted a commission-based system where agents are typically paid a percentage of a property’s sale price. The higher the sale price, the bigger the commission cheque.
But as property prices across New Zealand and Australia have exploded, many homeowners are beginning to ask an uncomfortable question:
Why does selling a $1.5 million home require three times more work than selling a $500,000 home?
In many cases, it doesn’t.
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🏠 The Great Property Price Inflation
Auckland’s median house price has more than doubled over the past decade.
Many suburbs that once sold for $400,000 now routinely see sales above $1 million.
The result?
Agent commissions have exploded alongside house prices.
Let’s look at a simple example:
| Sale Price | Commission (3%) |
|---|---|
| $500,000 | $15,000 |
| $750,000 | $22,500 |
| $1,000,000 | $30,000 |
| $1,500,000 | $45,000 |
| $2,000,000 | $60,000 |
The obvious question becomes:
Has the amount of work increased by 400%?
The answer is almost certainly no.
The same photographer takes the photos.
The same Trade Me listing is created.
The same open homes are conducted.
The same agreement is signed.
The same paperwork is completed.
Yet the fee may be tens of thousands of dollars higher.
🤔 The Dirty Secret Nobody Talks About
Many agents will argue they are not paid for effort.
They are paid for outcomes.
That’s partially true.
However, much of the increase in property values has occurred regardless of agent performance.
When Auckland property prices rose hundreds of thousands of dollars during the COVID property boom, did agents suddenly become dramatically better at their jobs?
Or did the market simply do the heavy lifting?
Many homeowners would argue the latter.
In fact, in a rapidly rising market, some properties practically sell themselves.
💰 The Wealth Transfer Nobody Notices
Commission structures effectively create an automatic wealth transfer from homeowners to agencies.
As house prices rise:
✅ The homeowner carries all the risk
✅ The homeowner pays the rates
✅ The homeowner pays the mortgage
✅ The homeowner funds maintenance
✅ The homeowner absorbs market downturns
Yet when prices increase:
💥 Agent commissions increase automatically.
It’s one of the few industries where fees rise dramatically without necessarily delivering any additional service.
📊 What Other Industries Do
Let’s compare.
Lawyers
Most charge fixed hourly rates or fixed project fees.
Accountants
Generally charge fixed fees or hourly rates.
Builders
Charge based on labour and materials.
Mortgage Brokers
Often receive fixed commissions from lenders.
Property Managers
Typically charge a percentage because their workload genuinely scales with the number of properties managed.
Real estate sales remain one of the few professions where a professional can earn dramatically more for essentially the same task simply because the underlying asset has increased in value.
🚨 The Million-Dollar Open Home
A homeowner in Auckland might pay:
- $25,000
- $35,000
- $45,000
- $60,000+
to sell a home.
Yet many of the actual marketing costs are often separate:
- Photography
- Video
- Trade Me
- Social media advertising
- Print advertising
- Signboards
Many sellers are shocked when they realise commission isn’t necessarily covering everything.
In some cases they are paying premium fees on top of premium commissions.
🏡 The Rise Of Fixed-Fee Agencies
Not surprisingly, alternative business models are beginning to emerge.
Some agencies now offer:
Fixed Fee Selling
A flat fee regardless of sale price.
Hybrid Models
Smaller base fee plus performance bonus.
Online Models
Reduced fees through technology.
Self-Service Platforms
Homeowners manage parts of the process themselves.
These models challenge the long-held assumption that percentage commissions are the only way to sell property.
📉 The Consumer Argument
Critics of percentage-based commissions make several points.
The Work Is Similar
Selling a $700,000 house and a $1.7 million house often involves similar processes.
Technology Has Reduced Costs
Digital marketing, online listings and electronic contracts have streamlined many aspects of the transaction.
Property Prices Have Outpaced Inflation
Agent commissions have risen dramatically because property values have risen dramatically.
Consumers Have More Choice
Buyers often find properties themselves online before ever speaking to an agent.
🗣️ The Agent Counter Argument
To be fair, many agents strongly defend the commission model.
They argue:
- They only get paid if the property sells.
- They absorb marketing risk.
- They fund prospecting and business development.
- They spend years building databases and relationships.
- Strong negotiators can often achieve significantly higher sale prices.
Many agents would argue that securing an additional $50,000 or $100,000 for a vendor easily justifies their commission.
That argument has merit.
The question is whether every agent consistently delivers that additional value.
⚖️ The Public Is Starting To Ask Hard Questions
Consumer frustration appears to be growing.
In a world where technology has reduced costs in almost every industry, many homeowners are questioning why commission percentages have remained largely unchanged despite soaring property prices.
The rise of online agencies, discount agencies and fixed-fee operators suggests some consumers are actively seeking alternatives.
📍 Property Noise View
The real issue isn’t whether agents deserve to be paid.
They absolutely do.
Good agents work hard, take risks, negotiate effectively and provide genuine value.
The real question is whether percentage-based commissions still make sense in 2026.
If the same property sells for $800,000 today and $1.6 million tomorrow, has the amount of work doubled?
Most homeowners would say no.
As housing affordability becomes one of the biggest issues facing New Zealand and Australia, expect more consumers to question a commission model that rewards rising property prices regardless of how much extra work was actually required.
One thing is certain.
If percentage commissions were invented today, many people would probably laugh at the idea.
The fact they have existed for decades doesn’t automatically make them fair.