Commission Rates – What You Need to Know


As with everything in life – you get what you pay for. Yes, we want to save money where we can. But we also know that cheapest is very seldom best. It’s all about the value you get for your money, not about how much it costs you.

To illustrate it simply: Most people don’t drive around in the cheapest car on the market. They drive the car that they believe gives them the best value for money, based on the features and comforts that are important to them.

The same is true when it comes to the fees you pay an estate agent for selling              your property.

Assuming that every agent would provide the identical marketing for a property, and the identical service, thus selling for exactly the same value, it would make sense to choose the agent that charges the lowest fee. That would give you the best value.

However, it’s a proven fact that agents don’t deliver the same marketing and the same service – and that both of these impact significantly on what you sell for. So surely it wouldn’t be the best value to choose the agent with the lowest fee, if it results in you selling for much less.

At the end of the day, what really counts for a property seller is what you get net – “in your Queensland-Real-Estate-Commission-Calculationpocket” so to speak.

Consider this: If Agent A sells your property for         R 2 million, and charges you 5% plus VAT,             you net R 1 886 000.

Agent B offers you much better marketing and service, and a selling strategy that attracts more buyers thus creating buyer competition. He sells your property for R 2.2 million, but charges a fee of 6% plus VAT. So you net R 2 049 000.

Which agent was the most expensive? It wasn’t the agent with the highest fee. It was the agent that offered you the worst value, and resulted in you netting a lower figure.

Sadly, all too often we see a seller selecting the agent with a low commission but offering little value. The result is a sale at a much lower price, and less in the pocket of the seller.

Does that mean the agent with the higher commission is always better value? No it doesn’t. It means the agent with the best marketing strategy, selling strategy, and that     can show how they attract the best buyers to get you the most in your pocket, offers      the best value.

Usually the cost of the better marketing and strategies is higher than the agent that offers very little. But be sure to ask your agent what value they will offer you. And here’s a tip: Get their undertaking in writing. Without a written marketing plan and service promise how can you hold them accountable?

Choose the agent who offers you the best value. It’s not the commission rate that counts – it’s what you take home that matters most.

Steve Caradoc-Davies
Principal of Harcourts Platinum, and Director of Harcourts South Africa

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A Sellers’ Options When Their Mandate Isn’t Working

So you are listed on Sole Mandate with a real estate company and it’s just not working for you.  What are your options?

Before you judge your agent, consider the following truth:

An estate agent can’t control when a property sells, or how much it will sell for.  Both of these issues are controlled 100% by the market – and the market is made up of the buyers.

But an agent does have 100% control over their service, as well as the marketing they deliver. 

When you signed your sole mandate you hopefully chose your estate agent based on the written marketing plan they proposed to you, as well as the level of service and feedback they undertook to provide.

If they are delivering on their service and marketing undertaking, then it would be unfair to dismiss them, as they are sticking to their agreement.  Perhaps the marketing you agreed on is not sufficient, in which case you could ask them to look at increasing this.  Or perhaps the market is resisting your current list price.

However, it may be that you are not getting the marketing and service you were promised in writing.  If this is the case, there should be a clause in your mandate agreement allowing you to give the agent notice to rectify their breach, failing which you can cancel.  Make use of this clause._GOD4499-adj

If there is no specifically stated obligation for the agent to market your property in the mandate, then you will have difficulty terminating the mandate.  I would suggest speaking to the principal in order to resolve this.

Lastly, you have the option to terminate as provided for in the Consumer Protection Act.  This you can enforce on 20 working days’ notice.  The Act allows for cancellation and a reasonable cancellation fee can be charged – so beware of this.

Whilst I strongly believe a sole mandate is the best way for a seller to sell their property, I would advise against signing a mandate if the mandate does not contain all three of these:

  • A written marketing plan that you can hold the agent accountable to;
  • A written service and feedback undertaking that you can hold the agent accountable to;
  • A clause allowing you to place the agent on notice to rectify a breach to either of the two above clauses, failing which you can cancel the mandate without penalty.

If you sign a mandate without these inclusions you are taking a grave risk.

If you already have concerns about your current mandate then I would strongly recommend you start researching Plan B.  Call in other agents and find out exactly what marketing and service they can offer you in writing, and what their market research shows regarding the value of your home based on their Comparative Market Analysis (see last weeks’ article).  Don’t make the same mistake twice!

Are you permitted to speak to other estate agents.  The simple answer is “Yes”.  It’s a free country.  You may speak to anyone you want and there is nothing wrong with researching what other options may be open to you should your current mandate expire with your property unsold.

Ethically, another agent may not encourage you to terminate your current mandate.  But they are allowed to explain their services, give you market information, and let you know what options will be open to you later, once your mandate has expired.

Your current agent may not take well to your research.  But don’t be deterred.  If they are delivering on their marketing and service promises to you then you will no doubt be inclined to extend their mandate should it be necessary.

Demand the marketing and service you need to sell – you deserve it!

Steve Caradoc-Davies

Principal of Harcourts Platinum, and Director of Harcourts South Africa

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