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Estate agents' fees are reasonable

16 May 2014

For as long as he can remember, South African estate agents have been asked (sometimes quite aggressively) why they feel justified in charging commissions at the "high" level they insist on - and this question is often backed by the statement that UK and European estate agents work on far lower commissions, said Bill Rawson, chairman of the Rawson Property Group.

Image: www.freedigitalphotos.net

The first point on this subject to be clarified, said Rawson, is that the service provided by South African estate agents is far more comprehensive and thorough than that of overseas agents working on 2% or 3% commissions.

"Quite often, such overseas agents do not even accompany the buyer to the property for sale - they simply hand over a set of keys or arrange a date for them to meet the seller. Then, too, they may place only minimal advertising or none at all and insist that the seller funds all the advertising. This is a common practice, even among the most reputable high-profile UK companies."

The plain truth, said Rawson, is that the level of service given will depend on the fees charged.

Payment depends on results

"Estate agents are in one of the few careers where the payment depends almost entirely on the results they achieve," he said. "It is simply not possible to give the sort of service South African agents are committed to unless they can charge at the accepted rates prevailing today."

The complaint about high charges, said Rawson, is inclined to crop up most frequently when a home is sold quickly and with little apparent effort.

"While it is completely understandable that the seller feels overcharged on such occasions, it has to be recognised that:

The sale may well have come about because the agency group to which the agent belongs has invested heavily in branding, advertising and IT communications - particularly websites - to achieve a high profile and a large measure of public trust.

The group, if it is at all reputable, will also have invested heavily in ongoing training, thereby giving its agents the skill to market homes competently and to steer away from the many legal and accounting pitfalls that can so easily occur when an untrained agent handles a sale contract.

The franchisee himself will be carrying the high upfront costs of buying or renting premises and telephones for his agents and adapting these so that they become congenial work areas.

All homes do not sell fast and some do not sell at all - and every marketing group's fee structure has to take this into account.

The agent's personal costs are also extremely high. He has to own and run a car, a laptop, a camera, a cellphone and, quite possibly, has to fund additional advertising to get his own name better known. As mentioned, agents seldom receive retainers - they have to live off their share of the commission they earn for their franchisees and they can go through very lean periods in which they earn nothing at all.

In the Rawson Property Group, said Rawson, the majority of franchises are charging high standard commissions in all price categories (not just upper-end homes) and these are accepted by the clients because the standard of service is generally agreed to be excellent.

"One cannot emphasise too often that selling so valuable and cherished an asset as a home can be highly stressful. The agent's task is to reduce the stress to a minimum while at the same time achieving the best price the market can deliver."

Commissions are often negotiable

Rawson rounded off his comments by saying that commissions are often negotiable, but, he added, clients should not resent it if their agent proves to be a tough negotiator.

"It has always to be remembered that if an agent is good at securing for himself and his superiors a satisfactory commission, he will probably also have the negotiating ability to secure a very good sale price for his client, the seller. This very obvious truth has been proved time and again in all the top-performing agencies throughout South Africa."