KEY POINTS:
Home-sellers will pay $1.2 billion in commission this year - but how much individuals pay, and who gets the money, is at the heart of an escalating rift in the real estate industry as it undergoes a major transformation.
Chris Taylor, founder of The Joneses real estate company - one of several new flat-rate businesses - yesterday described percentage commission as the "root of all evil" in the property industry.
Mr Taylor has already faced a Real Estate Institute disciplinary hearing this week over critical comments, which are deemed a contravention of industry guidelines.
The argument is a symptom of an industry battling with major changes, according to some insiders.
At least one expert, who spoke to the Herald on condition of anonymity, believes The Joneses is being singled out because of the threat it poses to the established players in the market.
Mr Taylor said that his company had no intention of backing down and that it would send a message to the industry.
"We believe we are doing exactly what consumers have wanted for a long time and what they deserve."
Associate Justice Minister Clayton Cosgrove, who is due to announce tighter regulations over real estate agents, said yesterday. "We have to end, in my view, the mates looking after mates perception."
The institute had publicly backed his planned overhaul but then "brought up a member on charges for effectively calling for what every Kiwi has called for - that as an industry they can do better."
About 100,000 houses are bought and sold each year. At an average price of $350,000, that's about $35 billion spent on residential property.
By the end of this year, New Zealanders selling their homes will have paid about $1.2 billion in commission.
The Joneses, along with Go Gecko, charges a flat fee rather than a percentage commission.
Other companies, such as Green Door and Home Sell, offer marketing packages alone to help people sell.
There are no figures on how rapidly the companies are growing, but Mr Taylor said staff numbers had quadrupled in the year since The Joneses was formed.
However, Peter Thompson, director of Auckland's largest real estate company Barfoot & Thompson, said the new players were no threat.
His company's 30 per cent market share had increased slightly since the emergence of the new flat-rate estate agents. "We see new players come into the market every day; some last and some don't.
"The Joneses have not had much of an impact on the Auckland market as far as we're concerned, but they've come in with their own line of thinking and good luck to them."
Murray Cleland, national president of the Real Estate Institute, said members of the institute sold more than 90 per cent of all residential proper-ties.
"Discount companies have come and gone and are more expensive than they suggest because customers have to pay for their own advertising."
Mr Cleland said if a good job was done, customers did not complain about the commission.
- additional reporting Mike Houlahan
Rivals' criticism backfires
Almost every estate agent who spoke to home-seller Lyndon Urquhart criticised The Joneses when he asked about the company.
"That was enough to make me think there must be some substance and something well worth looking at," he said.
Mr Urquhart signed up with The Joneses four days ago to sell his $1.5 million Remuera home.
He is set to save about $40,000 by using a flat-rate company rather than a traditional commission-based agent.
And he said The Joneses' slick marketing and promotion was also a big drawcard to help sell his newly-renovated, five-bedroom home with water views.
"We've been looking at different agents for the last month and we nearly got talked out of The Joneses, but their presentation was far superior. "And with a $1.5 million house, the cost of commission is pretty considerable."
For Antonia Cobb, selling her "week-day" home near the airport, the commission was not such a factor. She chose The Joneses to sell her entry-level, three-bedroom townhouse because she liked their punchy marketing. She would have paid around $13,000 instead of $7995.
The big divvy-up: who is getting what from pot
Several hands are waiting to dip into the commission pot when a home is sold through a licensed estate agent.
In the fashionable Auckland suburb of Grey Lynn, a three-bedroom house on a 1138sq m section sold last month for $1.5 million.
Typically, the agent who sold the property would scoop about 55 per cent of the $41,000 commission - $22,550, though the division is negotiable and could be as high as 70 per cent for a top agent.
Between 6 and 10 per cent usually goes to the owner of the franchise which the agent works for - up to $4100 of the cash for the Grey Lynn property. The remainder, $14,350 in this case, goes to the company which owns the franchise. Often, however, the figures can vary as everything is up for negotiation.
Sometimes other agents in the franchise take a cut if they have used their network of contacts to help sell the property.
Peter Thompson, director of Auckland's largest real estate agency Barfoot & Thompson, said the commission structure at Barfoot meant the seller was getting an agent who would look after the whole process, from listing to marketing to selling.
It meant that agent had an invaluable level of knowledge and expertise about the property.
Buyers also looked at the large established companies, which meant more publicity for the sale, he said.
However, Chris Taylor, one of the founders of The Joneses, said commission was the "root of all evil" in the property industry.
The commission structure created a "triangular relationship" between buyer, seller and agent, which meant the agent had a vested interest in a sale.
"Remove that relationship and the agent can do the right thing by the customer without thinking 'if this sale falls over I don't get to put dinner on the table tonight'."
Mr Taylor said he supported Housing Minister Clayton Cosgrove's review of industry legislation "but while a commission-based system prevails, the issues that arise will continue".
