What does it cost?

VICKI HOLDER gets the lowdown on the costs involved in selling a house these days.

When selling a home, most people opt for the professional service offered by a real estate agent. Before you give the listing to an agent, you should be aware of how much you should expect to pay and what that fee covers.

COMMISSION RATES

Commission rates vary between companies, locations and marketplaces. With franchises, each business is independently owned and free to make its own business decisions. Vendors should be advised of the rate applicable to their property when listing.

It's normally made up of a base fee, a higher rate for the initial portion of the sale price and a lower rate above the initial portion. For example, most agents commission starts with an administration fee of $500. They then charge between 3.85 percent and 4 percent on the first $250,000 to $500,000. The percentage reduces to around 2 percent on the balance.

Because it's a service for selling your house, vendors also pay GST on commission. Some agencies drop the administration fee altogether.

Unlike most, Ray White does not have a set commission structure. Carey Smith, chief executive of Ray White in New Zealand, says: "We pride ourselves on offering choice in the marketplace. This responds to the vendor's needs and also the area and style of property."

WHAT DOES THE COMMISSION COVER?

The commission is paid on a successful sale being signed off by the owner. Unlike other professionals who are paid for time worked, real estate salespeople only get paid for results. The sales consultant can explain exactly what the commission covers. The extent of the service varies between agencies.

Sandra Williams, marketing manager for Barfoot & Thompson, says: "The fee covers prospecting for purchasers, performing open homes, following up buyers, reporting to vendors and negotiating the sale, including preparation of documentation and collecting deposits. The intangible elements of the salesperson's job are equally important. For example, knowledge of the market and the buying and selling process, professionalism and experience to make the buying and selling process stress-free, and solving problems."

Bryan Thomson, chief executive officer of Harcourts New Zealand outlines Harcourts' comprehensive service: "The commission covers advice on marketing options and likely outcomes prior to listing, market research and sales statistics, construction of marketing plans, office window displays, network marketing among Harcourts sales teams, regular personal marketing meetings, inclusion in company marketing programmes as appropriate, property-for-sale signage, base photography, marketing to company buyer database, promotion to neighbouring properties as appropriate, copywriting, access to national and international buyers through the company referral system, access to specialist auctioneers and management assistance for your property sale to work with your individual sales consultant, access to Bluebook advertising, option to advertise on Harcourts' property TV channel (Sky Digital Channel 95) and access to Harcourts' AGC card for 100 days interest-free credit to fund marketing programmes."

ARE COMMISSION RATES NEGOTIABLE?

Some agencies are willing to negotiate while others refuse. John McTavish, general manager LJ Hooker, New Zealand North, says: "LJ Hooker agencies do not generally negotiate their commission, just as you would not ask your dentist to negotiate their fee."

In some agencies, it's up to the individual consultant. Tricia Lafferty, of Meo Realty, Ponsonby, looks at it this way: "If consultants negotiate their own commission for themselves, then they won't be able to negotiate the top price for you. It's unbelievable to me that some agents come into a listing presentation offering discounts before they've even been asked. I find it a statement of their negotiating ability, which is hopeless really."

HOW MUCH DOES AN AUCTION COST?

The only charge for an auction is the auctioneer's fee (between $300 and $500), which is for an experienced auctioneer to conduct an auction in a real estate agent's rooms. Fees vary from office to office and area to area. Barfoot & Thompson provides the auctioneer for free.

THE DEPOSIT

The deposit is generally 10 percent of the sale price of the property, but this is negotiable between the buyer and seller. Harcourts' Bryan Thomson says: "Reducing the deposit often weakens the offer in the eyes of the seller. We would advise against this in most cases."

Steven Glucina, of Ponsonby Real Estate, says: "We act for our vendors and we must take into account that an adequate deposit is received so they can use these funds to secure their new home, otherwise they may need to organise a personal overdraft for their deposit, which isn't a fair deal for them. An absolute minimum would be 5 percent."

THE MARKETING

The marketing of a property is negotiated with the vendor. There is no standard marketing budget as the campaign is devised to suit individual properties. Some agents suggest spending 1 percent of the value of the property, reducing that for the higher-value properties.

LJ Hooker's John McTavish says: "In today's market a good agent and an effective marketing campaign can produce spectacular results, especially if the property goes to auction."

Ponsonby Real Estate's Steven Glucina adds: "The amount of money required to market the home is really dependent on the individual property and the type of buyer that needs to be attracted to the home. Usually a $3000 marketing campaign will get the result necessary for the average home in the city fringe. We can't sell a secret and the more people that know the property is for sale, the greater the chance we have of getting a premium price for the home."