This article was published on 7 August 2004. Some information may be out of date.

QTwo weeks ago, you had a couple in their mid-thirties asking for advice. They had two young children and were keen to get ahead.

I would suggest that their priority for the next ten years is to enjoy their children.

I’m sure they could both flog themselves to make more money, but please tell them not to sacrifice the pleasure of quality time with their children.

Please repeat after me: All possessions are responsibilities.

AThat’s a rather grim view about possessions. Some of mine — such as books, pictures and CDs — bring me a lot more joy than responsibility.

Investment assets, though, do come with varying amounts of work, thought and worry.

The two people in question were considering borrowing against the equity in their house, and investing the money.

They didn’t want to buy property, and I told them the pros and cons of borrowing to invest in a share fund.

As Brian Fallow wrote recently, owning rental property “is not a passive investment, it is a business… — work, hassle, expense and risk.” But that’s not true of a share fund. It takes little time.

Still, your point has some validity. Parents preoccupied about what a share market dip might do to their wealth may not be the best readers of picture stories, or players of hide and seek.

When your kids are throwing two-year-olds’ tantrums, it seems they’ll stay young forever. But suddenly they are grown. Any suggestion that parents make the most of the precious early years has got to be good.

QWhile the Real Estate Institute of New Zealand does not normally respond to anonymous correspondents, some of the opinions expressed in Mary Holm’s recent columns deserve a factual response.

In one column, a correspondent says that “a house effectively sells itself” but then proceeds to contradict him or her self by stating that “it is not easy to sell your property yourself.”

We are surprised that Ms Holm was unable to pick up on this inconsistency. Her correspondent appears to want it both ways — but the fact that it is indeed not easy to sell your property yourself is why more than 90 percent of people employ real estate agents.

Nevertheless, Ms Holm asks if there are “any agents out there who are keen to defend themselves” — from the apparent accusation of working for their clients and charging a commission to do so.

The argument over real estate commissions is a tired one, but perhaps for the benefit of Ms Holm and her misinformed readers we can restate the facts.

Real estate commissions in New Zealand are negotiable between the agent and their client. Whether they choose a flat fee, or percentage, or a mixture is entirely up to them.

This is free-market competition at work. Real estate agents are free to charge as they like, and their clients are free to either accept or reject those charges. If they charge too much, clients will go elsewhere; if they do not charge enough, they may go out of business.

Real estate agents provide considerable value to the selling and buying process. With their databases and advertising channels, they create liquidity in the property market, which in turn helps both buyers and sellers achieve the best possible price.

In other columns, Ms Holm offers advice over how real estate businesses should be run. “Are all those expenses really necessary?” she asks an agent. “Do you need all the technology, the premises, staff, presents and so on?”

While we are sure that the real estate industry appreciates Ms Holm’s business advice, once again we believe the market dictates what is necessary to run a profitable business, overheads and all.

The real estate industry is extremely competitive, and companies are aware that any unnecessary expenditure will drive them out of business. The commissions charged therefore reflect the cost of running a business that delivers value to its clients.

It appears that many of Ms Holm’s unnamed correspondents have an axe to grind against real estate agents, with many “personal” anecdotes to share.

The Real Estate Institute operates a very strict compliance regime and all complaints to the Institute regarding the activities of an agent are thoroughly investigated.

Therefore, correspondents with genuine complaints should direct their grievances to the Institute rather than indulging in broad generalisations that unfairly impugn the reputation of an entire industry.

Graeme Woodley, National President (name published at his request.)

AClearly, you feel hard done by. So I’ve gone through the 17 letters on real estate agents and fees that ran between May 29 and July 10.

Seven were from non-agents. Three of them complained about high fees, while two wrote about selling via the internet, one about selling privately and one about multi-listing.

The other ten were from agents or former agents. Five explained why fees are as high as they are. Three others said fees were lower in the UK and the Netherlands (and one also offered to sell 10 houses for $4000 each); one described the Dutch auction system; and one said, “I agree with nearly everything that you and your correspondents have said.”

In my responses to the letters, I certainly criticised some agents’ practices.

But I also said: “It’s fair enough that agents make good money in the good times, to make up for the bad times.”; “An experienced salesperson’s negotiating skills can make a difference.”; “I’m sure agents have a better feel for pricing than DIY sellers.”; and “I’ve used agents for my last four house sales, and been reasonably happy with them.”

I also quoted Robert Kiyosaki’s recommendation to use agents in “Rich Dad, Poor Dad”, and argued against multi-listing, which most agents dislike.

All in all, I reckon I’ve been fair. The fact that readers — including many whose letters weren’t published — are angry with agents is your problem, I’m afraid, not mine. So is the fact that almost half the members of your industry who wrote to me agreed that fees are too high.

In response to specific points in your letter:

  • This column wouldn’t work if correspondents’ names were published. People don’t want their finances made public. But the letters to me are signed and presumably genuine. Why would people bother to lie?
  • In saying “a house effectively sells itself”, I think the correspondent meant that its quality, location and presentation are more important than anything else. That’s not inconsistent with difficulty in selling a property yourself.
  • The fact that real estate fees are negotiable was discussed several times in the columns.
  • I’m glad you appreciate my business advice! The point is that, in any business, it’s good to challenge expenses. In rental cars, stock broking and groceries, everyone thought there was only one way to do it until cheaper no-frills options were introduced. Why not real estate?

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

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.