A few days ago my uncle told me that he wanted to buy a house. I told him I was prepared to help him by showing him some of the properties on my portfolio. He did not like my idea because according to him, it would mean he would fork out R15 000 more than he had budgeted for. He was wrong. And I schooled him on the whole game. I hope he is now in the know, if not; this article will convince him and a thousand others like him.
Sales agents in different countries charge different percentages as commission for services rendered in the sale of a property. In South Africa, reputable agencies start negotiating at around 7.5% of the sale price. This figure is very negotiable and it is not surprising that some smaller agencies charge between 3% and 4%. In Zimbabwe, commission hovers around 5% while, in Australia it can be anything between 2.5% and 4%. Despite these differences, perhaps one needs to understand why an agent should be paid commission in the first place.
Normally an agent is expected to do the following;
• Do a thorough market valuation of the property and determine correct pricing.
• Formulate a comprehensive marketing plan which will guarantee maximum exposure of the property.
• Advertise the property on various websites, newspapers and through “For Sale” boards on or around the property.
• Arrange viewings with prospective buyers in the hope of getting the best offer for the property.
• Conclude the sale process and sometimes continue to liaise with bond origination companies and conveyancers to ensure the deal succeeds.
In South Africa, the agent and their agency foot the bills for most, if not all the above. Imagine, newspaper adverts, hundreds of phone calls and fuel to go for viewings are all paid for by the agent before they even know that they will successfully sale the property. Only when the property has been sold do they demand to be paid their commission. Fair, isn’t it? My uncle did not know this.
My uncle also ignored the fact that the agent is usually contracted by the seller to sell their property. As such, it is the seller who pays the agent, and not the buyer. The buyer merely pays for the property. Recently however, we have seen buyers who hire property consultants to advise them when buying a property. These are totally different from sales agents and that is a topic for another day.
There are sellers who also argue that if an agent sales a property quickly, they do not deserve to be paid their full commission. This is unjustifiable. What sells a property is the amount of coverage that the agent puts on the property through advertising. A property is sold quickly because the agent already has a database of prequalified buyers waiting to be introduced to the right property. Most importantly, a property sells quickly because it is priced right. In short, excellent service sells a property quickly. Instead of trying to cut commission, the seller whose property sells quickly should actually pay more.
Then there is the seller whose property takes long to sell. They may think that the agent is not doing their job right, and sometimes they may be right to think so. However, it is also important to consider the time, effort and expertise that the agent actually put to ensure that the property finally sells, when it does. Most, if not all sales agents are not on any fixed monthly salary, they survive on commission. As a result, they work every day and sometimes funny hours to try and sell properties so when they do, it is because they have done something right.
Let’s face it, my uncle is not the only one who did not understand why agents should be paid any commission. Any agent who does not pride themselves in offering quality service to both the buyer and the seller probably does not deserve their commission. But an agent who delivers as promised deserves lots of respect, and COMMISSION.
Shingai Mabena is a sales partner at a leading properties firm and is based in Johannesburg South Africa. He can be contacted on firstname.lastname@example.org. Mabena is also studying towards his Masters of Business Administration (MBA) with a local institution.