Estate Agents and the Fees You Pay

When selling there are 5 critical issues to consider, of which one is how much commission you will pay.  The other 4 are:  What is the market value of my property, what marketing will I receive, what is the service I will get, and which agent will I select.

The amount of commission you pay will have a significant impact on how much you will receive “net” for your property.  But, when discussing commission, it’s important to view all 5 of these issues as a whole, not commission in isolation.

Allow me to explain.  The only way to sell for market value is to ensure your property has an effective marketing plan.  This means that you will need to be advertised in print, online, though buyer databases with email marketing, on show, by use of boards, and through referral networks.  The more effective your marketing plan, the more buyer enquiry you will receive.

The better your marketing plan the more the cost.  The two are directly related.  When an agency cuts their commission this Imagemeans you simply will not receive the marketing you need to create buyer enquiry and buyer competition.

The more buyer competition there is the better the offer you will receive.  Buyers will offer the most they are prepared to pay when competing against other buyers.  When there is no competition then the offers are lower.

Good service and strong communication are also critical to ensuring that your agent lists in the correct selling range, and gives you buyer feedback to ensure you appeal to the market.

What really matters to a seller is how much you receive “in your pocket”.

Take this scenario:  Agent A offers to sell your property for a seemingly low commission of 5% plus VAT – but there is little marketing, and certainly no written marketing plan.  It’s a proven fact this results in lower offers and a selling price less than market value.  Assume you sell for 10% less than market value.  At a selling price of R 1 500 000 that would mean you net R 1 414 500.

Agent B offers you a very strong marketing plan to include all the aspects mentioned above.  You receive excellent exposure, strong buyer interest, and sell for maximum market price.  This can be up to 10% more than a property that is badly marketed.  The fee they charge is 6% plus VAT.  In this case you would sell for R 1 650 000 less the fee, which would net you R 1 537 140.  The difference is over R 122 000.  Even if you sold for only 5% more, that’s still over R 52 000 more to you.

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There is no doubt you are better off paying the higher commission provided you receive stronger marketing.  What if your property sells quickly – is it still fair to pay the agreed percentage fee?  Agents get paid for results, not for time.  A quick result is the best result possible for a seller.  Properties sell for more when they sell quickly, and you are spared the inconvenience of buyer viewings for months.

Don’t list with the cheapest.  In this market you simply can’t afford to and it will cost you in the long run.  As with all things in life, you get what you pay for.

Steve Caradoc-Davies

Principal of Harcourts Platinum, and Director of Harcourts South Africa

Email your real estate question to steve.cd@harcourts.co.za.

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