Questions about the Estate Agent Commission

Is an estate agent’s service in selling your home worth their brokerage fee and is it, as it should be, value for money?

Estate agents’ brokerage fees in South Africa are not fixed by law.  This permits negotiation, but as a seller you should carefully consider the implications of the percentage brokerage fee you agree with an agent.

If an agent is charging 9% brokerage fee on the value of the sale, you must be convinced that the quality of the service is going to be worth the price. Conversely, if an agent’s brokerage fee is 4%, he must convince you that the quality of the service at this lower than average rate is not going to adversely affect the final selling price of the property.

Agents committed to a top quality service spend time and money to ensure that a property is well exposed to achieve the best possible market price for the seller.

Some firms and agents cut their brokerage fee to secure a sole mandate, but this could well turn out to be the most costly and expensive ‘saving” you could make. You must beware in case this so-called saving will be paid for in a lower selling price or failed transactions.

Cut rate brokerage fees invariable lead to diminished service.  When the return is lower an agent may be tempted to sell the property quickly, and at lowest cost to his agency, to make up this  shortfall.He may cut down on advertising and promotion and persuade you to accept an offer below the market value of the property.

Also, the question must be asked – if the agent cannot successfully negotiate his normal brokerage fee and has to cut the rate to secure business, how confident can you, the seller,  be that he can negotiate the best possible price for your property?

Our brokerage fee is not a cost – it’s a value.  It’s true to say that it’s not what you pay, but rather what you get in return that ultimately counts. We believe that our brokerage fee should be in the “income earned” column of the balance sheet and not in the “expenditure” column.

The agent’s responsibility to the seller is to accurately assess the market value of the property, advertise and promote it at the agreed price, and keep you well informed of response so that you can make a sound business decision. Following that, handling the agreement of sale and ensuring all documentation is processed correctly and timeously, makes the agent a very valuable link between you and the buyer.  The importance of good “after-sales” service cannot be stressed enough.  Our own Company’s after-sales service include an “in-house mortgage banking division”, where our loans consultants ensure that the purchaser obtains the required mortgage loan as quickly as possible and at the best competitive rate.

Our conveyancing department keeps in touch with the lawyers and the bank granting the mortgage loan right until the date of transfer to ensure that the seller receives the funds from his sale as quickly as possible.   Our agents and conveyancing department keep in touch with both buyers and sellers, keeping them informed of the progress of the transaction.  In most cases, because of time, effort and basic expenses, you will find that the agent’s brokerage fee has been well earned.


Legal recourse

Should a sale be cancelled by the buyer, the seller, or both prior to a suspensive condition being met, although no  impediments exists to meeting that suspensive condition, the agent is entitled to his brokerage fee.  In simple terms, if the sale would have gone through had not one or both parties cancelled, the agent should get paid.

Where a buyer fails to meet his obligations after the suspensive conditions have been fulfilled, the buyer would normally be held responsible for payment of the agent’s brokerage fee.

Should a seller renege on his obligation to pay his estate agent, the agent would have no alternative but to take the matter to court.

Fortunately, this is a rare occurrence as most agreements of sale provide for commission to be paid once the terms and conditions have been satisfied.

Buyers and sellers are protected by law, which demands estate agents adhere to a strict code of conduct in terms of ethical and moral behaviour – as laid down in the Estate Agents Act of 1976.

The Government appointed Estate Agency Affairs Board protects the right of the consumer and is a watchdog to ensure estate agents adhere to the code.


Going it alone

There are, of course, people who try to sell their own property to save the brokerage fee charged by estate agents. In many cases such people practically give their property away, by selling below market value.  There are a number of reasons for this:

  • When advertising, private sellers highlight the fact that there is no estate agent’s brokerage fee to be paid.  Buyers invariably make lower offers for the same reason – no brokerage fee to be paid.
  • A vital part of the negotiating process is the right to criticise, not only praise a property.  For this reason, many buyers and sellers find it awkward to negotiate.  The private seller is unlikely to get honest feedback from polite or embarrassed buyers and it is therefore difficult to gauge true market reaction.  This lack of knowledgeable market assessment of his property, together with a buyer’s unease when dealing directly with the seller, often results in the seller giving way on price, to his financial detriment.
  • The market changes rapidly and an un-informed and inexperienced seller could be offering his property at yesterday’s price.
  • The property is not exposed to as many buyers as it should be, with the result that private sellers often draw negative conclusions following insufficient buyer reaction and response.

A good agent more than justifies the brokerage fee earned.  In many cases, after a person has tried to sell his house privately without success, the net selling price achieved by an agent thereafter could be even more than the seller was previously asking.

In conclusion, it is also appropriate to mention that estate agents are indeed a “unique species”.

What other profession or industry offers a client the opportunity of paying only if and when services are fully and satisfactorily rendered?

The estate agent receives no fee for the time and effort spent on preparing the property for sale; nor is he reimbursed for the considerable amount spent on marketing it.

In other words, unless an estate agent can bring to the negotiating table an offer, at the price and on terms acceptable to the seller, he does not get paid.

He earns a brokerage fee on, and is paid only for results – that is when the house is sold and transfer is effected.

We believe in the quality of our brand, our company and our people.  When we successfully sell your home, we will ask you to recognise the result we have delivered for you and to remunerate us accordingly!


Click on the below links to open to articles


Why Exclusive Authority to Sell

Work with an estate agent

First impressions count

Selling your home and buying another

Beware the dangers of over-pricing

Renovate or buy a new home: which is better?