Selling a house can be a costly business with agency commissions taking thousands of dollars off the sale price.

But an alternative to commission-based fees is a flat-fee structure which its proponents claimed could save Kiwi home-owners "half a billion dollars" each year.

Tall Poppy real estate director Sam McIntyre said if its structure for the average house price was applied to all 101,796 residential sales in the last 12 months, vendors could have saved at least $500m in fees.

For the average New Zealand property of around $650,000 Tall Poppy charged a flat fee of $12,500 saving sellers at least $6000 compared to almost $20,000 on a 3 per cent commission.


"New Zealand's real estate agency industry is overdue for a shake-up. In agencies with the traditional fee structure, home-owners are paying significantly more to sell their home, just because house prices have increased," McIntyre said.

For properties $500,000 or less Tall Poppy charged only $10,000, for those over $750,000 to $1m the fee was $15,000 and for every subsequent $500,000 above the $1m made in sales an extra $5000 was added on to the fee.

Currently most agencies in New Zealand charging commission take 3 to 4 per cent of what the home is sold for + GST and fees. This could result in fees of $18,000 to $26,000 on the average Kiwi home or $30,000 to $40,000 on the average Auckland property.

Comparatively in Australia commissions are slightly lower, between 2.5 per cent to 3.25 per cent, and in the UK even lower still at around 1.8 per cent.

McIntyre said a report Tall Poppy had commissioned through an independent company showed that, of the 500 consumers surveyed, 75 per cent felt real estate fees were too high in New Zealand.

Property owner Graham Bensemann had years of experience with commission-based real-estate agents and was getting "fed up" with the growing costs.

"I think it's out of proportion with what people do for you and what you actually achieve."

Bensemann was about to try and sell the property himself, when he came across Tall Poppy.

He particularly liked knowing what he'd be charged from the get-go.

"As it turned out it was well worth it, a no-brainer if you ask me," he said. "I felt I got as good a go from them as anyone else."

There were a number of other real estate agents that had a lower-than-average commission structure or had a similar flat-fee model, including The Property Market which charged just 2 per cent commission and online agent 200 Square's $4500 flat fee structure.

However, Property Institute of New Zealand chief executive Ashley Church said what the flat-fee model saved sellers could cost them in the value of their property.

He said in recent years there have been a number of companies with variations of the flat-fee model that fell through.

"Most of them dumped it because they couldn't retain agents, but more importantly it demonstrated they weren't achieving the best price for their clients.

"You don't have the same impetus to achieve the same prices."

200 Square's Grant Wakelin said it was "erroneous" to think agents didn't work as hard if they weren't paid a commission.

"We've got a very low fee because we've changed the way that we do work; we focused on what real estate agents do that adds value to the home owner and stripped out a whole bunch of things." chief marketing officer Jeremy O'Hanlon said paying commission was well worth the price if the agent was able to create a competitive market.

"All they need to do is shift the price by a few percentage points and you are better off."

However, McIntyre said the company's agents worked hard to achieve equal if not better results than those on a commission.

"We have to really strive to do the best job that we can, so we do get traction," he said. "We've set records [sale prices] on streets over and over again."

He said because the company had moved away from paying overheads for traditional real estate fixtures, like building rents, it meant they could viably afford to charge less.

Trade Me's head of property Nigel Jeffries' advice to those looking to sell was to choose the "top agent" rather than the best pricing model.

"Like any professional they are very, very good at their job. That will more than compensate you for the cost."

How the fees stack up on a $650,000 sale

Tall Poppy: $12,500 flat fee
The Property Market: $3500
200 Square: $4500
Agent charging 3 per cent commission: $19,500

How the fees stack up on a $1m sale

Tall Poppy: $20,000
The Property Market: $20,000
200 Square: $4500
Agent charging 3 per cent commission: $30,000