What real estate agents do
When buying and selling real estate most people use the services of valuers, bankers, mortgage brokers, lawyers, building inspectors and real estate agents. The role of real estate agents is to market property and negotiate sales. In the early 2000s more than 90% of property sales involved real estate agents.
Real estate qualifications
Under the Real Estate Act 2008 anyone running a real estate business has to be licensed. In 2008 there were around 1,790 licensees and 16,000 salespeople.
A salesperson’s certificate, gained by passing an exam after two to three weeks’ part-time study, is needed to enter the sales force. Branch managers of real estate offices require a more advanced qualification. Some branch managers and licensees also sell real estate.
A New Zealand franchise
Bayleys started as a small operation concentrating on the industrial and commercial sectors in Auckland. They then used franchising to achieve national coverage and enter both the rural and residential markets.
Real estate companies
In the early 2000s real estate sales were dominated by a small number of large companies, owned by either local or overseas interests. Nationwide coverage is often achieved by franchising a real estate brand. The local licensee owns the business and pays a fee to the head office of the real estate brand.
Real estate fees
Real estate agents are paid a commission by sellers – in the early 2000s it was usually 3–4% of the sale price, negotiable depending on the level of service offered. Sometimes an agent charges a fixed amount regardless of the selling price.
Most real estate agencies offer a comprehensive marketing package, but some cheaper agencies leave more of the marketing to the vendor and may not run open homes. Increasingly, sellers pay for advertising costs.
The commission is usually split 50:50 between the licensee of the agency and the salesperson. Sometimes 50% goes to the licensee, 25% to the salesperson who listed the property and 25% to the agent who actually sold the property. Some salespeople rent a desk from the licensed agent and receive a larger share of the commission. A few agencies pay their staff a salary, plus pay them bonuses dependant on the sales they achieve.
A competitive business
It is said that most real estate business is conducted by a small percentage of the sales force. Top agents earn more from commissions and can negotiate with their agencies for a higher percentage of commissions.
The competitive nature of the commission system results in a high staff turnover – a large number of new salespeople last a year or less. Because of this many are inexperienced, resulting in quality control problems for the licensee, and service problems for the consumer.
Responding to concerns about dishonest practices by some agents and a lack of protection for consumers, on 4 September 2008 Parliament passed the Real Estate Act 2008. It became law in November 2009, replacing the Real Estate Agents Act 1976.
The new act establishes a public register of real estate agents, and sets standards for agents’ training and the conduct of real estate businesses. It creates an independent real estate agents authority to oversee licensing of agents, provide consumer information, deal with complaints, and carry out disciplinary processes. An independent disciplinary tribunal will deal with serious cases and, if necessary, award compensation.