WHO'S PAYING WHAT: ESTATE AGENT COMMISSIONS AND THE COSTS OF SELLING A HOME
Whether you're buying or selling, the property market can be complex to navigate with plenty of costs and legal jargon getting thrown around, making it difficult to know what you're paying for. One common question is: who pays the estate agent?
An estate agent is working - first and foremost - for the seller. It's the agents' job to get the best outcome that they can for the seller, and they must work with the sellers' interests in mind. In return, the seller pays the agent a commission, which is usually set as a percentage of the selling price of the property. So, the seller is the one that pays the agent commission.
In South Africa, that commission is usually between 6 and 8% but - crucially - it's only payable once the sale has been completed and the agent has fulfilled all their obligations and duties to the buyer. While buyers are often handed large bills for transfer costs and bond fees once an offer has been accepted, sellers also have their fair share of expenses to pay.
In the current digital age, it can be tempting to think that selling houses is an easy job. With sites like Gumtree and Facebook Marketplace becoming increasingly popular, it's easy to assume that listing homes are practically free. Why, then, would I bother paying an agent?
For starters, the data that agents use to give you accurate valuations of your property comes with monthly costs and the knowledge that agents have of the market is something that can't be replaced with simple online listing sites. The process of selling homes is complex and the legal knowledge required to be a good estate agent is something worth paying for.
Property listing sites like Property24 and PrivateProperty aren't free to use either, and agents incur the costs associated with using these platforms. There are also the day-to-day costs of running a business - agents need email addresses, computers, printers, and fuel to get themselves to and from viewings. It may come as a surprise to many, but agents often spend between 30 and 50% of their commissions on the costs associated with selling your home.
Ok, so you know why you're paying the agent and what they're doing to earn that income. The next question is: are these commissions negotiable? In short, yes. If you're a seller looking for an agent, you can negotiate the commission that you'll be charged. But there are a few things you should keep in mind when you do so.
It costs the same to sell your home, regardless of how much it sells for. If your property is on the lower end of the market, the agent is making less profit on the sale and might not be willing to reduce their fee. The longer your property is on the market, the higher the costs are for the agent. So, if you're looking to sell a property that might take a while, or you're demanding a higher price than the agent thinks is reasonable, you might find yourself paying higher commissions.
At the end of the day, your agent will do the best job that they can with the income that they expect to make and the incentives for agents work in a way to balance the market: they earn more when the house sells for more, but they only earn if it sells at all. Your best bet as a seller is to trust your agent to do their work because their job is to get the best outcome for you, and their income depends on how well - and how quickly - they can do that.
Author: Pierre Rousseau (Founder/Principal PropertyTime)
