Real estate agents' charges 'too high'

Homeowners are paying too much to real estate agents who have a stranglehold on the industry, a property expert has claimed.

Massey University senior property lecturer Dr Susan Flint-Hartle said the big firms' stranglehold was stopping fees from reducing.

The comments came as a Wellington agency, charging half the standard commission rates, defied the property slump by expanding into the Auckland market.

Flint-Hartle said real estate fees were far too high for the level of service rendered.

"There are some very good sales people and agents but there are a lot of not-so-good ones, as well. Like any established industry, there's a stranglehold on the way things are done."

As well as commission of 4 per cent of the selling price, owners can pay advertising costs of up to 1 per cent. For a $400,000 home, that could mean an extra $4000 on top of a $16,000 commission.

Flint-Hartle said the advertising, paid for by the home owner, promoted the agency as much as the property.

Wellington-based Borders agency, set up three years ago, charges property owners a 2 per cent selling fee, with agents working from home using an in-house computer system to keep overheads low.

Founder David Graves said his company has struck a chord with budget-conscious clients.

"Effectively, we increase the value of people's property. If we can take $10,000 off the commission, we increase the seller's net take by that amount."

Under the Borders' system, the 2 per cent fee - paid only if the property sells - includes a $1000 advertising package, and vendors can walk away from the "rip it up" listing contract at any time.

But other cut price agencies have failed to establish themselves in New Zealand. Last year The Joneses, which charged a flat-fee commission, folded after just 18 months. Last month the Albany branch of Australian-based Go Gecko became the latest to close its doors, though agents in Tauranga, Cambridge and Howick were still working.

Established real estate firms said the cut-price agencies couldn't provide clients with the same level of experience, service or results.

Peter Thompson, managing director at Barfoot and Thompson, said a lower fee might look appealing, but people needed to be aware of what they got for the money. "Like anything, you get what you pay for," he said.

"If you sell your house for say $20,000 less or it takes longer to sell, then that lower rate might actually have cost you.

"Now is not the time to be experimental when selling your most valuable asset."

Mike Bayley, managing director for Bayleys Real Estate, said providing quality resources, analysis and training had a cost, but resulted in a better service.

LJ Hooker general manager Keith Neiderer said agents were working harder than ever to sell properties. "It's not easy, it's long hours and it's all very well for other people to comment who aren't doing the hard slog.

"It's a tough market and at the moment it's not a matter of putting a sign up and it's sold. There's a lot of time and effort and research and open homes."