Is Agent Commission Worth It In A Buyers' Market?

The long-term sellers’ real estate market in New Zealand is slowly turning, with decreases in average home prices currently being reported across the country. This decrease in pricing, coupled with a growing number of properties coming on sale, is predicted to continue for the foreseeable future and move NZ into a full-blown buyers’ market.

For sellers looking for the best price for their property, but who missed the pandemic-years price boom, there remains a desire to decrease expenses as far as possible in order to gain a better return on investment (ROI). For some, such expense-lowering endeavours may include selling privately or opting to use the services of low-commission or fixed-rate agents. The thinking is that by reducing real estate agent-associated costs, it might be possible to recoup some of what is lost in the current market downturn.

While in theory this would be true, the reality is more complex. Depending on the ultimate selling price, a fixed rate may prove about the same, if not more, than what sellers would have spent on agents’ commission. Furthermore, cheaper agents – whether fixed-price or low-commission – generally sell homes for less than they’re worth; thereby undermining any possible gains sellers might have achieved by utilising their services.

Real estate fees in NZ are also indicative of service and expertise. In a buyers’ market, it often happens that low-cost agents simply don’t sell houses. That’s because their reduced rates commonly equate to either less effort or less expertise, making it harder for them to sell effectively in an especially competitive market. By comparison, average to high-commission-based agents tend to be better qualified to sell homes at a higher price and within a shorter turnaround time. The result, then, is that by paying a higher commission, sellers actually see greater ROIs, even in a buyer’s market.