I had a discussion with a lady the other day regarding the rate of commission charged by South African estate agents. She was horrified at the percentage that we charge in comparison to that charged by other countries.
In 2000 the Institute of Estate Agents of South Africa (IEASA) issued their Tariff Book whereby they recommended a 7.5% commission on residential property sales. This rate therefore served as a benchmark in the estate agency industry. In 2004 they no longer issued any guidelines, so commission no longer has a set rate.
Mexico and South Africa charge the highest commission: 7.5% + Vat. The USA charges 5%. To put this into perspective though, our monetary value is no where near that of the other currencies. In the UK, agent commission can be as low as 1.18%. For a home of £150 000, commission would be £1 770.00 = R31 306.91 at today’s rate.
Say a property here sells for R1 million. Commission at 7.5% + 15% Vat is R86 300.00, leaving the seller with R913 700.00. If the seller wants R1 million in his pocket, the agent should list at R1 086 300.
People are also under the impression that agents will do anything for their commission and that it is negotiable. What they don’t understand is that agents receive about a quarter of the commission earned.
The following is a commission report which I received as an agent when VAT was 14%
GROSS COMMISSION: R90 000,00
VAT 14% R11 052,63
Royalty %6 R 4 736,84
Agency 50% R37 105,26
Agent 50% R37 105,26
Agent deductions: PAYE R 7 421,05
NETT COMMISSION: R29 684,21
Agents work really hard for their money, use their own petrol, often their own phone accounts. They have to pay for boards and other advertising materials. The agency pays for internet advertising which can be very expensive, newspaper advertising, admin staff wages, printing, rent etc. Running an estate agency is not a cheap enterprise.
I always told my sellers that I preferred to list at full commission because that way I was able to negotiate should a lower offer come in. I only ever once made full commission. Agents who list at a low commission often make the seller drop their price in order to secure a deal. I’ve heard of deals which didn’t go through because the agent refused to drop commission.
The best way to list a property is to list at market value – i.e. what properties are selling for currently, and at full commission. That way the seller doesn’t waste years waiting for the property to sell, the buyer purchases something at market value and the agent earns the correct wage. It’s a win-win-win situation.
I was introduced to nutrition as a small child when my mom used it to treat an ulcer. Since then I've been interested in supplements, healthy eating, reflexology, shiatsu, energy work and Traditional Chinese Medicine.