Why Commission?

What you don’t know is there is a lot that goes on behind the scenes.

  • Constant research into market trends
  • Creating of adverts, photos and video
  • Knowing the law around property
  • Constantly watching and changing things to keep the adverts well listed
  • Many hours getting to know buyers so we only bring the ones that would be interested in your property
  • Putting to gather an offer to purchase.
  • Once the offer is accepted by both parties it is then a deed of sale which is not the end for the agent.
  • The process of following up with attorneys, providing information for the sale.
  • And many more

These are some of the reasons why estate agents charge the commission they do. Also you can do this work for many homes and just not get that sale. So look at the commission this way. Pay each agent for the work they are doing on the sale of your property or pay the commission to the agent who made the sale. The costs of all agents marketing is far more than the commission paid to the agent who made the sale. If an agent is not charging the full commission there is something they are not doing. If you offering 4% to the agent and another is offering 7% were would most agents focus their effort. Also by offering 4% you are reducing the money for marketing.

A general rule of thumb in the industry is that 20% of today’s estate agents sell 80% of all property. Let’s take a property of R1 million selling price with a 5% commission = R50 000. Usually the seller does not want to pay commission on this amount and that equates to R43 478 net. 50% of this amount is payable to the principal in the traditional model which leaves the agent with R21 739 pre-tax; R17 392 post tax on an average of 20% tax.

The average agent sells 7 houses per year: R17 392 x 7 = R121 744 per year … R10 145 per month. When the economy is down or when the market has to many agents the number of sales in smaller towns are less than the average.

Estate agents work on a contingency basis. Agents only get paid if they have a successful transaction. The seller has no up-front cost, no risk – an agent assumes all the cost and risk involved in getting a home sold. And an estate agent with influence, a wide network and industry knowledge will earn the commission he asks.

The process to become an agent much more stringent than in the past, but the actual job is way more exacting which requires agents to not only be au fait with multiple legislations, but to also have more than a passing acquaintance with diverse fields including marketing, legal processes and finance.

Getting buyers and offers is easy, getting the right buyer to conclude a successful sale in the desired amount of time isn’t. There are so many factors that need to be taken into consideration. This is where a professional broker really does the work to earn their well justified commission.

Just understanding the legal aspects like the Consumer Protection Act, Property Practitioners Act, Immovable Property Act, local Municipal Bylaws or if it is bought by a trust or needs a bond. The sale of the property can cost you after transfer if all aspects of the law are not considered in the contract and the information provided to the buyer.