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Changing Real Estate? Better for Everyone?

Earlier this week I came accross a post from TradeMe talking about the income that real estate agents make and I found it interesting to say the least. 

Here is the information source url: https://www.trademe.co.nz/c/property/article/how-much-do-real-estate-agents-make-in-nz

One side of the article below says how much agents make which is great if you have a listing that sells (and there are plenty of homes that don't sell) to then say at the end of the article that the fee can be negotiated along with the marketing costs to reduce the fee the seller pays.

Our argument is that  as a former real estate sales person working in a regional area the amount of money made is not any where as high or as frequent as the average claims and for most part the sales person is working for free bank rolling the agent and the client untill the unconditional date of a potential sale. And as other marketing service providors are paid for there services , like photographers, media specialists etc , we decided there needed to be a much fairer way to charge that was better for the sales person and the seller.

So back in 2018 the first idea of FiSBO was born: A service that could be sold to sellers, on a prepay basis with many of the marketing tools and systems to help them sell, at a price point they could justify and the sales person would be paid regardless of the outcome. What I didn't know was how I was going to make it, how much it would cost in time and money, what it would be built in, what would my brand be and how would it look? Let alone getting to the market and spreading the word.

At the same time this idea was buzzing around in my nebulus sized brain I had formed a partnership with REINZ (the industry body) and TradeMe to promote iStagings VR tours to agents. Far out talk about hard work trying to sell a low cost service that could improve real estate agents marketing, it was like trying to squeeze blood out of a stone! And the push back from traditional agents not wanting change. Unfortunately after some serious time and money on my part we didn't get the uptake but we did manage to get the iStaging URL to be accepted by both portals and domain in Australia. iStaging is great company and remain our Virtual Tour Providor of choice today.

At one of the meetings with TradeMe a comment was made and I said " I reckon I can make that, it could be an addon for you". Do you think I can get them to see me about that idea now? Nope, too small. But what I ended up building I suppose has become a competitor to them, maybe that is why?

I digress.

So this spurred me on to build out a brand and service where the person doing the marketing gets paid, the seller pays far less than on a commission basis so they save more of the proceeds of sale and the software replaces all the ineffeciencies of the real estate agents process, with the contract being drafted by each parties solicitor.

The upshot is better for everyone, there is no "commission breath" or "buying the listing" or "pumping prices" or "dodgy sales" as at the point of inducement the buyer and seller are pre-negotiating directly via a web portal and solicitors are acting in their clients interest with no conflict.

And for the openhomers, they are working on a gig basis, part time, 10 hours per gig on average, and can do as many or little as they like, they have a clear set of tasks and guidelines to operate within so its perfect for any person to do.

A franchise model: 

When I looked at what services we could provide, how it was done we needed to be able to protect our brand and ensure that our people where do the same thing. I mucked around with subscription ideas but then settle on building a franchise system with the help of Tereza Murray Franchise Consultants and Goodwin Turner to do all our legal work. Tereza and her team where absolutely amazing to deal with, building out the systems and manuals in a seamless and collaboritive way made the franchise very easy but thorough at the same time. The final franchise agreements was prepared by Scott at Goodwin Turner which they continue to prepare and execute for us.

A franchise agreement is robust and sets out how to do business and how the relationship will work, it's a commitment with certainty for both parties. We certainly recommend checking out the FANZ website as FiSBO® is a current member to help you understand some more detail on how franchising works.

Being a franchise , (like McDonalds) means all customers can and will get the same service from every franchise partner and we the franchisor can make service promises as we are all on the same page. Being a franchisee means you are part of  bigger brand, you are not recreating and fighting against other independants to gain market share, also you can leverage the success of the brand when you start. Plus you can get capital gain if one day you decide to sell.

Now back to the article. 

With approximately 16000 real estate people working in NZ trying to sell on average 70,809 homes per year do you think many are doing well? Thats is 4.42 homes per year data source from RBNZ and the average house price of $924,000 (QV) and the average commission from Barfoots as below = ($300,000 * .0395) + ($600,000 * .02) *1.15 (GST) = $24,330 divide this by the commission split of 50% = $12,165 (gross) less 20% tax = $9732 per listing x 4.42 (average sales) = $43,015 per year. Now this figure assumes agents are working full time at 40 hours per week  = $21.50 in the hand per hour.

Now there is no gaurantee that the sales person will make that money as they are working on commission, they are mostly self employed independant contractors. They must take all their running costs, fuel, insurances, credit card debt, office expenses, license costs, compliance and training costs from this as well.  

So with this in mind we wanted to build an alternative that gave consumers are real choice, and the people doing the work either as a franchise owner or as a part time openhomer could make money from the work they do. 

With FiSBO, 10 listings per year you will make $50,000, 20 listings per year $100,000, your average work time per gig is 10 hours so your hourly rate will be on average $500 per hour. You will only work for clients that pay you upfront using our platform.

And your focus will be marketing property, not selling, our app helps sellers to do that!

So with this in mind, who wants to become a FiSBO Franchise?

Read the article from Trade Me below.

 

How much do real estate agents make in NZ?

Being a real estate agent can be a lucrative career, but not always.

Last updated: 24 January 2024


We’ve all seen real estate agents driving expensive cars, with their names and faces on for sale signs all over our towns and cities. And many of us have wondered - how much do real estate agents earn in NZ?

 

There are 16,668 entities and people licensed to sell real estate in New Zealand, all earning different amounts, according to the Real Estate Authority. Let’s take a closer look. 

Average income of a real estate agent in NZ

The average salary for a real estate agent in New Zealand is $99,785, according to data from Seek. Assuming a real estate agent works a 40 hour week and 50 weeks a year, that’s just under $50 an hour (but most real estate agents would probably say they work longer than 40 hours a week!)

 

Of course, not all real estate agents earn the same amount. In fact, some earn far less and some earn far more (even into the millions of dollars) depending on how many homes they sell.

How are real estate agents paid in NZ?

Real estate agents in Aotearoa New Zealand are almost always paid by commission instead of salary. That means they’ll earn a percentage of each sale, paid by the sellers or vendors of the property once the sale is completed.

 

Barfoot and Thompson, one of Auckland’s largest real estate companies, uses this commission structure - 3.95% of the first $300,000 and 2% of the rest. They have a minimum commission rate of $11,000 + GST.

 

Real estate agents usually do not earn the entire commission (except for those who work for themselves). Instead they’ll be paid around 55 percent to 70 percent of the commission, with the rest going to their real estate agency. Real estate agents who’ve made more sales throughout the year may earn a higher percentage of the total commission.

 

What this means is that if a real estate agent doesn’t sell any houses they get nothing at all.

A real estate agent only gets paid if they sell properties.

How much do real estate agents earn per sale in NZ?

Real estate agents may get nothing if they don’t sell any houses, but they do get quite a lot if they manage to sell a home.

 

For example, let’s say an agent using the above commission structure sells a property at the national average asking price of $864,650. The total commission will be $23,143. The agent may get anywhere from $12,729 to $16,200 (depending on what percentage of the total commission their agency is paying them).

 

To earn over the average salary for a real estate agent they’d need to sell eight houses, or fewer if they’re earning more than 55% of the commission. If an agent sold just a house a month they’d be earning well over $150,000, which is around double the average salary in NZ.

What other costs do home sellers incur and can I negotiate commission?

When selling a property, sellers incur other costs on top of the real estate agent’s commission. This may include an administration fee of up to $500, marketing costs of $2,000 to $5,000 to help promote the property, as well as lawyer’s fees.

 

Before you sign the agency agreement it’s a great idea to try to negotiate the commission down. Some agents will be more open to this than others but it’s worth a try. When negotiating, explain to the agent that you’ve spoken to other agents and you haven’t made a decision yet.

 

Next ask for a reduction in commission - you might be surprised how much the agent will agree to, especially if there’s a lack of listings available. Another option is to negotiate free marketing in the event of a successful sale, which will save you several thousands of dollars.

 

 

 

*We hope this article has provided some helpful information. It's based on our experience and is not intended as a complete guide. Of course, it doesn’t consider your individual needs or situation and it is not financial advice.Be sure to speak with an advisor if necessary.