This article was published on 3 July 2021. Some information may be out of date.

QI would request through your excellent column that you remind house sellers of the advice — now years ago — from David Russell, Consumer NZ head honcho, concerning commission demanded by real estate agents.

He pointed out that your contract is subject to negotiation, including the commission.

Bearing this in mind when selling my parents’ home in Rotorua I put a sign on the lawn: “House for sale. Agents welcome”. All the major agents came up the drive promising miracles. Pushed as to what “the usual” meant on fees, most withdrew when I offered only half what they demanded.

Two agents didn’t however, as all we wanted was for them to include prospects who wanted to view listings in that suburb to include us in their “bus run”. No advertising, open houses, auctions etc.

Nowadays rather than the complicated sliding scale they prefer, I would suggest a fixed fee for the sale of the property. And never, never give them exclusive rights.

In the end we sold privately to friends of the couple who rented the place whilst theirs was being built.

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 priceStandard feeProposed fee

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.

QI had a similar insurance claim problem to your readers two weeks ago and took it to the Insurance and Financial Services Ombudsman, who turned it down in favour of the provider.

So I then took it to the Disputes Tribunal and got a resounding win. It was interesting hearing the insurance company twist and turn on the speaker phone provided by the disputes service.

Incidentally I have recently cancelled my contents insurance policy after having several small claims declined, as it always seemed to be a waste of time. But I do have full coverage on everything else.

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?

QMany, many years ago I had trouble with an insurance company re a claim. I just could not get any sense out of the person I was dealing with, but as they had the last say, I gave up. Claim refused.

I now deal with a broker, have done for many, many, many years. He does everything for me. Always there to answer questions.

Yes, I know I am paying for his services, but after my earlier experience I wouldn’t have it any other way.

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!

QI am 54 and have accumulated around $600,000 in KiwiSaver since its inception. I currently contribute the maximum 10 per cent of my pay.

Additionally I have another super scheme with a different provider with a balance of around $400,000 that I contribute around $1,000 per month into. And my wife has a KiwiSaver account with a third provider with a balance of around $100,000.

Another commentator recently stated that you should never pay more than the minimum into KiwiSaver, and spread any additional savings far and wide.

Her argument was based upon: diversification in case something goes wrong with a provider, and not locking up all your funds until 65.

I’m keen to hear your thoughts. How far should one go with diversification? Should I go back to 3 per cent into KiwiSaver and pay the difference into my second super fund, my wife’s KiwiSaver fund, or indeed a new fund?

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.

QYour page last week had a little box saying, “Don’t miss out on KiwiSaver money.” It was about getting the maximum government contribution.

Surely this should have mentioned that it doesn’t apply if you are over 65 and still working.

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.

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Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former 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.