NZ Herald 3 July 2021

AIt’s been a few years since we discussed real estate commissions in this column. In that time, house prices have soared. Has any agency reduced its percentage to take that into account? I would be interested to hear about it.

You’re absolutely right, commissions are negotiable. Your way of doing it is one idea. And I’ve got another.

My main grievance about real estate commissions — along with the fact that they have become really high — is that most agents want a high percentage of the first several hundred thousand dollars and a lower percentage of the rest.

For example, one large agency charges:

• 3.95 per cent on the first $300,000.
• Plus 2 per cent on the rest.

This gives the agent little incentive to get a high price for you.

Let’s say you hope to sell for $900,000. At that price, the agent would get $23,850. But if you got a disappointing $850,000 offer, the agent would get $22,850, just $1,000 less.

Will the agent suggest you turn down the offer, and keep working for perhaps several more weeks in the hope they will get maybe $1,000 more? Or will they try to talk you into accepting $850,000, telling you about all the negative feedback at open houses and so on. They can then take their money and run — to the next listing and another $23,000 or so?

Here’s what you could propose instead.

• On a sale price of $900,000, the agent gets $25,000 — an attractive $1,150 more than under their system.
• On any price above $900,000, they get a whopping 10 per cent of the extra. If the house goes for $950,000, they would get $30,000.
• On any price below $900,000, their commission is cut by 10 per cent of the shortfall. If the price is $850,000, they get $20,000 — $25,000 minus $5,000.

They have a much bigger incentive to get you a good price.

Real Estate Agent’s Commission

Proposed structure gives agent more incentive to get a higher price

House price	Standard fee	Proposed fee
$850,000	$22,850	$20,000
$900,000	$23,850	$25,000
$950,000	$24,850	$30,000

Where does it leave you? Sure you will pay more on $900,000. But your agent will be motivated to get you a higher price. And while they get 10 per cent of that extra money, you get 90 per cent.

Meanwhile, if the best they can do is $850,000, at least you’ve paid $2,850 less.

I’ve proposed commissions like this twice when I’ve sold my home. One time — in a market in which agents had plenty of listings — several agents all refused to do it. It made me doubt their confidence that they could sell at the price they had suggested. But the other time it worked. It’s worth a try.

A few more tips:

• Tell all the agents that you will be discussing commissions with their competitors too.
• Check marketing costs, in addition to commissions. They can vary widely.
• You can renegotiate the commission at any point. If your agent is pushing you to accept a low price, you might agree if they take a lower commission.

On giving one agency exclusive rights to sell your property, I’m not sure.

Of course the agents prefer it, and say they will work harder if they are sure they will get a commission. But some financial experts say it’s better to list with several agencies. Then each one will strive to be the one who brings you a good buyer.

If you decide to give an agency exclusive rights, make it for a short period — perhaps a month. If they are doing well, you can always extend the period. But if not, it might be time to go elsewhere.

AWell done for persevering. And you did this in the right order.

The Insurance and Financial Services Ombudsman is a financial disputes resolution scheme that costs you nothing. Go there first — or to whichever of the four disputes schemes the company you are arguing with belongs to. You are not bound by the scheme’s decision, so if you’re not happy you can then go to the Disputes Tribunal or a court.

If your claim is for $30,000 or less, the Disputes Tribunal is a good next step. It’s like a less formal court, in which you represent yourself. No lawyers are allowed. Fees range from $45 for claims under $2,000 to $180 for claims between $5,000 and $30,000. You are bound by its decision.

However, I don’t think you’ve been so wise about your contents insurance. By all means choose the highest excess, so you don’t bother with minor claims. But do you really want no financial help if you lose heaps in a flood, fire, theft, tornado, eruption, earthquake or who knows what?

AFair enough! And, by the way, you may not be paying for his services.

The Citizens Advice Bureau says an insurance broker’s commission “is paid for by the client (that’s you), either as a set fee or as a percentage added to your premium.

“If you are choosing an insurance broker be sure to find out how they calculate the commission that you’ll be charged, and whether the insurance companies also pay them a commission.”

However, other sources say you don’t necessarily pay more for insurance via a broker than if you bought directly from the insurance company.

Always ask a broker how the money works. If they are not happy to explain it, give them a miss.

It’s also important to ask them which insurance companies they work with. Preferably it will be many. And you might want to check what’s offered by companies the broker doesn’t deal with.

It’s worth noting, though, the findings in Consumer NZ’s recent member survey about insurance. “As we’ve found in previous years, consumers who buy direct from the insurer are much more likely to be happy with the service they’re getting, compared with those who buy cover from a bank or a broker.” This was true for car, house, contents and life insurance.

If you have complex insurance needs, or you would like the sort of support our correspondent gets from her broker, try using a broker who gets good internet reviews. If not, you might be better off doing it yourself.

P.S. I’m not sure I’ve ever before run a letter with so many “many”s in it!

AI’ve always said it’s best for most people to contribute enough to KiwiSaver to get the maximum government and employer contributions. But further savings are better invested elsewhere, so you can withdraw the money if you need to.

But there’s an important exception. Many people say they need to lock up their savings in KiwiSaver. Otherwise they will be tempted to spend the money, and end up retiring with much less. For a good chunk of the population, tying up the money makes sense.

What about worries about provider strength? There’s no government guarantee on KiwiSaver. But the Financial Markets Authority watches providers closely, as well as their supervisers — separate firms that make sure the providers are investing your money where they say they are.

If your provider did get into financial trouble, perhaps because of poor business practices, that shouldn’t be a problem for you. The scheme’s investments — and your membership — would be transferred to another provider. If you didn’t like the new one, you could always move.

It’s still possible, I suppose, that an unscrupulous provider, in cahoots with an unscrupulous superviser, could siphon off money to South America. Possible, but highly unlikely.

For those who want to lock up their savings in KiwiSaver, I don’t think worries about provider security should stop them.

In your situation, your other super scheme probably locks in your money too. If you wouldn’t be tempted to spend, it would probably be best to save beyond 3 per cent in a separate accessible fund. You can never be sure you won’t need it before retirement.

AOr over 65 and not working. Unless — in both cases — you joined KiwiSaver before July 2019 and were over 60 when you joined. In that case, you can get the government contribution for five years from your joining date.

You’re quite right. Once again I’m guilty of not including all the KiwiSaver bells and whistles. I did go into all of this just two weeks before — including the choices for those in my second sentence above. Still, I’m sorry if I confused anyone.