This article was published on 14 August 2004. Some information may be out of date.

QThere are many times I have been tempted to write to you. However the exchange between Mr. Woodley (president of the Real Estate Institute) and yourself in last weekend’s Herald has finally pushed me over the edge.

The issue I wish to address relates to the misconception that real-estate agents will negotiate their fee structure.

Earlier this year I decided to list for sale a property at a very popular beach. I sent out detailed information to ten separate agencies, requesting amongst other things a marketing plan and fee structure with the objective of entering into a binding contract to sell the property with one agent.

I received nine extraordinarily professional responses but surprise, surprise the fees were all identical.

Having bought and sold several properties, my experience is that the only time the fee structure is really negotiable is when a sale could fail, over a few dollars. Then the agent is prepared to dip into their own pocket and discount the fee to save the commission.

AOh no, not more letters about real estate fees. I do not want to re-open the debate. But this is an important issue that hasn’t come up before. So just this once!

When I showed your letter to Graeme Woodley, his response was, “There’s no collusion at all. There’s huge competition.

“If you ring five real estate companies in Auckland, their standard commission rates will be different.”

I did. And for the most part they weren’t.

For good measure, I rang ten firms, including three small firms that appear not to be part of a franchise and three within the same franchise.

No fewer than eight — including the three in the same franchise — had exactly the same commission structure.

And it wasn’t as if they all just happened to use the same simple 3 per cent or whatever. They all charged $500, plus 4 per cent of the first $300,000, plus 2 per cent after $300,000, plus GST

That translates into $9,563 on a $200,000 house and $18,563 on a $500,000 house.

What’s more, one of the two other firms had only a slight difference — and it erred in the wrong direction for competition. Its cutoff for the 4 per cent rate was $350,000 instead of $300,000.

The other exception was Barfoot and Thompson, which charges 4 per cent on the first $200,000, plus 2 per cent on the next $300,000, plus 1.5 per cent after $500,000, plus GST.

On a $200,000 house, that comes to $9000, and on a $500,000 house it’s $15,750.

Woodley also said negotiation is common, adding, “It’s easier to negotiate with independent real estate companies than with franchise organizations, where the owners don’t tend to give their representatives much authority to negotiate. Independents are more flexible.”

Two of the ten agents I phoned volunteered that they were open to negotiation, but only one pushed that point — although I have to admit he really did push it. “If it comes down to commission, we’re so short of listings we don’t mind giving you a discount,” he said. “We’ll match the cheapest. You’re calling the shots at the moment.”

Maybe others would have been negotiable if I had asked. But does the average property seller do that? (Note: They should!)

Over all, my experience almost matched yours.

What, I wondered, does the Commerce Commission — whose purpose is “to promote dynamic and responsive markets so that New Zealanders benefit from competitive prices, better quality and greater choice” — think about all this?

“We have two Commerce Act investigations into the pricing practices of the industry going on at the moment,” says spokeswoman Gail Marshall.

I’ll keep you posted.

QA house buyer raises a loan of $250,000 for a 20-year term from a bank with an interest rate of 8 per cent.

At the end of the term, how much will have been paid in principal and interest?

P.S. I did have a table of rates and terms but suspect it has been “borrowed” by family!

AAnd everyone denies ever having seen it, right?

Anyway, the answer is a little more than $500,000. You pay back twice as much as you borrow.

And if you increased the term to 25 years, the total would be almost $580,000.

It’s quite extraordinary, actually, how we calmly take out home loans and proceed to pay double what we borrowed without batting an eyelid.

What if you want to check out other interest rates and terms?

You wrote to me by snail mail, which suggests you haven’t got a computer. A few years ago, I ran instructions in this column on how non-computer owners can make mortgage calculations on a calculator. But they were long and tedious.

Hopefully, you can get to a friend’s computer, or one in a library, because the internet is full of mortgage calculators.

In trying out about 20 calculators, though, I found that many don’t do any more than tell you what your monthly payments would be for different loan amounts, terms and interest rates.

Some also tell you how much you can borrow with given repayments each month. And some tell how much you will save by boosting your repayments.

It’s quite hard, though, to find one that calculates the total interest you’ll pay over the life of the loan. Most of the calculators are on lenders’ websites, and perhaps they don’t want to highlight such numbers!

The two that I like best are on:

  •, run by the Southern Cross Building Society. As well as the numbers, it gives you graphs of such things as the principal/interest makeup of your payments, tables of how much principal you will have paid off after each year, and so on.

    It’s interesting to note that its mortgage amount stops at $500,000. That may be getting a bit outdated these days.

    But if you’re borrowing more than that, you can simply enter half of your mortgage total, and then multiply monthly payments, total interest payments and total mortgage payments by two.

  •, run by Cairns Lockie mortgage bankers. With their first calculator, “How much would…”, you can plug in two different interest rates and see, side by side, how much difference that makes to each monthly payment and your total repayments.

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.