There are certain dangers in working with more than one agent on a property and in the case of agents’ commission, this risk is even more relevant, explains Craig Hutchison, chief executive officer of Engel & Völkers Southern Africa.
The rule of thumb is that the commission is earned by the agent whose efforts were the “effective cause” of the sale.
Where do commission disputes come in?
The rule of thumb is that the commission is earned by the agent whose efforts were the “effective cause” of the sale.
As you can imagine, this can become a very problematic situation because two or more agents can claim that they introduced the buyer to a property and the case can end up in court or going to arbitration and being dragged out for months.
The other side of negotiating commissions
Estate agents have been encouraged over the years to rather negotiate on such disputed commissions and no-one disagrees about the reasons for that.
There is, however, another side to the argument that is not heard often enough.
Any agent, who at the start of the listing is willing to cut their commission, must be treated with caution.
A professional agent knows how much work is involved and that they will do their utmost to market your home relentlessly and in the best possible manner until your optimal price is reached, and will also be working for 100 percent (if not more) of their commission percentage.
Saving money on commission is very often a fallacy as a compromised commission often leads to compromised commitments, which will most likely result in a compromised price for your home.
One also has to keep in mind that again, this fee is an agent's livelihood.
Similar to the fee you will pay to an attorney for services rendered. Imagine at the end of every month, having to negotiate your salary with your employer depending on how much work he thought you did the past month, and also what he thought you were worth.
If an agent sells your property in two days instead of two months, should they be penalised for working smarter, harder and faster? Is the aim not to sell your property in the fastest possible time for the best possible price, and if an agent does exactly that, why are they not entitled to their payment for the promised services rendered?
Another argument which often arises is where a seller receives a lower offer, and thus feels they have to cut the agent's commission.
Agents do a lot of running around to get your home looking right for the right people and each activity takes up time, effort and money – all commodities worth paying for.
Remember that if the property sells at a lower price, the commission is automatically also lower, he says.
Therefore, both parties are negatively impacted, which is why an agent will always attempt to get you the best possible offer on your property.
What constitutes an agent's commission?
1. Qualifications
Estate agents are qualified individuals who have either done an accredited course or have spent a full internship year to learn the trade.
They bring skills and expertise into the industry that aren't just taught in the day-to-day business environment. Mandate negotiations, understanding of property law and contracts, and the qualification of potential buyers are just some of the many elements that form part of the package you're paying for.
Above and beyond their qualifications, agents bring with them their experience in the real estate industry, knowledge of local, national and international market trends and an objective perspective, which make their assistance in finding the right buyer or the perfect home almost invaluable.
2. Connectivity
Consider what you'd pay a corporation for their database of clients. Information is 'king' and estate agencies with established local and international networks and client databases, are goldmines in terms of offering you indirect access to one of their core business elements.
Paying an agent a percentage commission is a small price for tapping into this prized source.
3. Marketing
Agents do a lot of running around to get your home looking right for the right people and each activity takes up time, effort and money – all commodities worth paying for.
These include photography, creation and printing of brochures, profiling at exhibitions, organisation and management of show days, buying and putting up for sale and on-show boards, screening of and communication with prospective buyers, driving to and from site, advertising in property magazines and newspapers, regular communication etc.
Estate agents are qualified individuals who have either done an accredited course or have spent a full internship year to learn the trade.
Remember that even before you were looking to sell or buy, the agent was busy, day in and day out, canvassing your area with marketing material and door-to-door visits, essentially building up a relationship and information base with which to give you optimum service, points out Hutchison.
4. Support structures
When it comes to commission you may also want to think carefully about which estate agency you choose to work with.
Your commission percentage does not only go towards the agent, but also towards the infrastructure supporting them.
Look at elements like the quality of their marketing material, the sophistication of their brand, their local and global connectivity and their training facilities to see what you're paying for in an agent.
“At the end of the day, if you're serious about selling your home, the best advice is to get someone who is just as serious about it as you are.”
There are agencies out there who adhere to global real estate standards and whose agents are true property sales advisors, worth every cent of their commission.
So the next time you decide to buy or sell, you should perhaps select the estate agent who will commit 100 percent of their effort to get the best price and therefore their commission percentage, rather than looking for someone who is willing to do the job for the least reward, he adds.
Print
