Time for agents to cut commissions

High time South Africa's estate agencies slash their commissions. Cutting hefty property commissions will help inject fuel into the real estate market

South Africa's new Reserve Bank governor, Gill Marcus, ruffled feathers when she announced that the Monetary Policy Committee (MPC) decided to leave the repo rate unchanged this week. The repo rate guides commercial bank rates, and many property owners were hoping that interest rates would be chopped yet again.

Every time the rate is cut, consumer debt repayments - for example on home loans - reduce. That, in turn, means banks are willing to grant higher mortgages for property deals - a development that makes estate agents very happy because it usually translates into additional property sales and, as a result, more income for estate agencies in the form of sales commission.

The Congress of South African Trade Unions (Cosatu), an organisation which represents hundreds of thousands of employees, said it was "extremely disappointed" at the SARB MPC's decision to "leave the level of interest rates unchanged at its present high level of 7%".

"It is a great missed opportunity to promote growth and create jobs through a decisive cut in rates. This could have given a lifeline to firms which are struggling to survive, by cutting their cost of borrowing, and thus saved hundreds of jobs. It could have given a stimulus to new job-creating investment by cutting the cost of borrowing start-up capital. It could have eased the burden on individuals and households who are battling to pay the interest on their bonds and loans," said Cosatu's spokesperson Patrick Craven.

Cosatu has been fed up for some time with the MPC approach of moving the repo rate mainly as a means to get the rate of inflation within a band of 3-6%.

Inflation is on its way down, but unemployment is rocketing, said Craven. Nearly 1m jobs have been lost already this year with more to come.

"It is obvious that the main problem the country faces is the economic recession and the massive levels of joblessness, and not inflation. That is why the Alliance Summit on 13-15 November 2009 called for a review of monetary policy and this has now become even more urgent. COSATU will do everything possible to implement the Summit resolution as quickly as possible and to persuade the Reserve Bank that the country cannot afford the current levels of interest rates any longer and that it must change course," he said.

Agreeing with Craven and Cosatu's workers about the repo rate, but for different reasons, are the bosses of some of the country's top estate agencies. Dr Andrew Golding, who heads up the Pam Golding Properties' international property selling empire, also said in a statement the "decision to keep the repo rate steady is disappointing".

Cutting the rate would have been "a positive move towards helping boost the South African economy. It would have been good news for cash-strapped consumers, including home buyers and existing home owners, and would have provided a most welcome year-end boost just prior to the festive season," said Golding.

His peer Brian Falconer, chief executive of Colliers Residential, said something similar in a statement, also distributed widely to the media. "The latest repo rate decision by the SA Reserve Bank means no festive celebrations for the property market." A repo rate cut "would have been just the shot in the arm the property market needed ahead of the festive season". He emphasised that the past two years have "been the toughest years in living memory for anyone in the property market today".

No doubt some estate agency bosses are pinning their hopes, too, on some fiscal stimulus in the form of property-related tax cuts when the national budget is unveiled in three months time.

Realestateweb reckons that, instead of giving advice to our monetary policymakers, some of the nation's estate agency bosses should also do their bit to help inject some fuel into the real estate market. They too could free up some cash for consumers.

Just as recession-knocked businesses across the economy are cutting their fees, estate agencies should do likewise - and we are not talking about the dwindling army of estate agents who do all the leg-work. We are talking about the companies who share half of the agents' commissions and take most, if not all, of the extra fees generated through add-ons, like mortgage origination and kick-backs on insurance.  The 5% to 10% plus VAT that the bigger estate agencies charge seems excessive when you consider that elsewhere in the world, like the United Kingdom, the average deal seems to be going through for 1-2% commission. Presumably similar efforts and strategies are put into selling residential property wherever you are, with few exceptions.

South African estate agents, we are told, are earning on average a relatively modest R13 000/month - a bracket that is likely to mean most can't afford to buy in the areas where they sell properties to others. Some bosses, on the other hand, seem to live in the lap of luxury thanks largely to commissions and fees that seem to be considerably above world norms.

Realestateweb has nothing against entrepreneurs reaping the rewards of their efforts and imaginative thinking, however the whole commission and remuneration structure seems skewed in South Africa - perhaps a big reason so many professionals, like lawyers, have left their practices in favour of running house-selling businesses.

Dr Golding and estate agency boss friends should do their bit for the economy and the property market by chopping their, and your, share of the hefty property sales' commissions. Quite possibly they'll make up the financial difference through increased sales - and they'll give the property market that elusive "shot in the arm" they're hankering after, with benefits that should extend well beyond the festive season.

 Jackie Cameron is editor of realestateweb.co.za - SA's fastest-growing property information and news website. Write to jackie@realestateweb.co.za.

Think estate agency bosses should tighten their belts?  Do they earn too much in South Africa? Share your views below this article.

Property valuation bonus! Subscribe to the Realestateweb newsletter before the end of November and get a special introductory discount of R25 for first-time users of our automated property valuation reports - including suburb reports. A special voucher number will be delivered to the inboxes of all Realestateweb newsletter subscribers, for exchange on a property valuation report accessed through www.realestateweb.co.za (click here) before 1 December.

Services Subscribe to newsletters News feeds Share this article Facebook Google Laaik.it Yahoo! Digg del.icio.us

Comments

 

responses to this article

Very good article Say Pietie bought a property for 1mil, he thinks that is what its worth......WRONG!!! The property is worth what the seller got for it like any share or anything you sell. Well, the property is actually worth 930 k, because the agent took a . .more whopping 70k. But wait, after a year Pietie thinks he can sell it for a profit, say he wants 1,1mil. But wait, its in the market for 1,2 mil, because agent want his 100k commission. Now, nobody wants to buy his house. Who wants to buy any investment with a 10% fee. Moral of the story, the house is worth what the seller gets in his pocket. . .less by PietPompies on November 20 2009, 10:39 Find this comment inappropriate? Report it

Away with agents! Now the estate agents want sympathy and a shoulder to cry on! Estate agents were not complaining when the going was good and they were creaming it, selling 20 houses a day, each! Slash their commissions to 0.5%! Better yet, sell your property ex-estate . .more agent! Do it yourself! Close down all the estate agents! How about offering a service that's worth paying a commission for! . .less by Pam Gold-ring on November 20 2009, 10:48 Find this comment inappropriate? Report it

Agents fees 2 % Max . by George on November 20 2009, 11:10 Find this comment inappropriate? Report it

Path of least resistance Just use the smaller mom and pop estate agents or independent agents, they are more willing to negotiate commissions with clients and its also rumored that internal to their organization are more willing to negotiate commission splits with their top . .more performing agents. After all the legal stuff is taken of by lawyers. . .less by Tuscanite on November 20 2009, 11:10 Find this comment inappropriate? Report it

Competition Commision should investigate Estate Agents Competition Commision should investigate Estate Agents collusion on commision percentages !!! by Bob Hopes on November 20 2009, 11:24 Find this comment inappropriate? Report it

Two prudent steps forwardIn 1) commission should be on a par with trading other asset classes such as shares & bonds about 1% would be more than I would be willing to part with deed, no one forces you to use the services of an agent 2) Pravin1 was handed a can of worms by . .more Trevor1 but there is a good case for reducing transfer duty from 5 to 8% to zilch. After all every one aggrees everyone needs a house. Hats off to the civil servants, excuse me, political masters, for exchange control relaxation. Cosatu et al must be delighted that the rand indeed, weakened, somewhat. The prudent bear is mindful that there is nevertheless a gravy train to be funded !!! . .less by The Prudent Bear on November 20 2009, 11:30 Find this comment inappropriate? Report it

transfer duty shoud be on the purchase price minus the commission i still hold the opinoin that transfer duty should be on the nett not gross purchase price, and yes the agencies should not be working for more than about 5% by dfb on November 20 2009, 11:32 Find this comment inappropriate? Report it

end of the line i remember fondly the time i made an offer on an investment property, about 2 yrs ago..but my offer was 30 % below asking..the estate agent (from a homenet office in newton park PE) , decided that i should get lost , while she laughed in my face...LOL . .more heres the funny part.. I left, with my cheque book.. about 4 months later she called me, begging me to give her the same offer .....LOL..so, i offered her 30% less than that.....she once again told me to get lost... she calls me again..2 months later...saying she'll accept my final offer...you can guess what i told her.....right..! i got a great deal on another place....so "estate agents"....pick your battles carefully..and be carful who you tell to get lost.... i now advertise in the newspaper to make private offers..outside the agent process...i'll never use one again... . .less by Super Duper on November 20 2009, 11:43 Find this comment inappropriate? Report it

Commissions Where do you come with 10%?? Most agencies that I know of charge between 4 and 6%. Even the big ones. Please name some who charge 10%. by Curious George on November 20 2009, 12:31 Find this comment inappropriate? Report it

Estate agents are a cancer I actively trade property for a living (renovate for re-sale and rentals), when I still used estate agents they caused more deals to fail than any other single factor. The commisions they think they "earn" are so far out of line with any possible . .more value they add its a joke. The vast majority of people who become estate agents are useless bottom feeders who chose that line of work because they are too incompetent to do anything else and embarrass themselves with the drivel they talk. They generally don't even understand the finance/conveyancing/tax implications of property and I wouldn't trust them to sit the right way on a toilet seat. . .less by Property trader on November 20 2009, 12:51 Find this comment inappropriate? Report it

Estate agents will not cut commissions We tried to sell our house through a number of agents. Not one was prepared to accept less than 4.5% plus VAT-over 5%. They would rather lose the sale than cut commissions. They are just a cartel. Pity the competition commission doesn't investigate . .more them! . .less by Sophie on November 20 2009, 13:15 Find this comment inappropriate? Report it

Ridiculous If you don't want to pay fees then rather sell your house privately. Oops - but you have no clue how to value your house, market it, and ensure that the documentation is in order. No-one is forced to use agents but they all do. Why, because it is a tough . .more stressful, irritating process and if you choose the right agent they are well worth the commission. . .less by Joe on November 20 2009, 13:40 Find this comment inappropriate? Report it

@Jackie and @Property Trader Are you so bored or are your ratings as a journalist dropping so much (or Realestateweb's) that you have to write an article like this. Selling prices are negotiable and, therefore, as the prices include commission (at negotiable rates) so are . .more commissions. If Property trafer is such a clever D*** in real estate then why does he use the wrong agents time and time again. Does he know that commission is tax deductible and appears as an expense in his books. He obviously overpaid for properties and now blames agents. So typical. . .less by Bored on November 20 2009, 13:52 Find this comment inappropriate? Report it

Great! That will get rid of Tuscany here! by on November 20 2009, 14:36 Find this comment inappropriate? Report it

Yeah! They will try anything EXCEPT lower the price of houses, not so? Preposterous! by on November 20 2009, 14:40 Find this comment inappropriate? Report it

commissions If one nominates a specific conveyancer to handle the transfer, usually he will do the necessary documentation. The "Pro Forma" contracts used by Estate Agents need little explanation by EREWHON on November 20 2009, 14:48 Find this comment inappropriate? Report it

SA loves Tuscany! Thats why there are so many Tuscan themed houses. Instead of less you will end up with MORE! That will make you happy :-) by Tuscanite on November 20 2009, 15:00 Find this comment inappropriate? Report it

@ Joe Ooh Joe I'm sooo scared of all the documents (think you are refferring to the sale agreement, cause the lawers and the bank does the rest) and the valueing thing, I guess you are refferring to getting a valuer to do the valuation,ooh and the marketing, . .more how will I make a board to put up in front of my house with my silly face on that reads"for sale" and run some ads in the local paper...do us all a favour and reduce your commissions to a level that doesn't kill the deal. Super Duper is right-you need to pick your battles cause this is a war you are going to lose!Those days of creaming it are gone! . .less by Johnny V on November 20 2009, 16:23 Find this comment inappropriate? Report it

great argument ok Johnny - why don't you sell your property privately I am sure you will do a great job. You sound really well educated! by Joe on November 20 2009, 17:54 Find this comment inappropriate? Report it

corollary to high interest brates low prices. God but these estate agents are a bunch of dim wits. Their business depends on transaction volume not price. Interest rate are not and shoudl not not be of the slightest concern. All equations have two sides. If . .more interestr ates are high then priceswill compensate. . .less by cassandra on November 21 2009, 00:07 Find this comment inappropriate? Report it

Commissions are a sellers cost Giving 77K on every million to an agent always surprises me, however this is the sellers decision as long as they deduct this off the value of the property and not try add it on. Most of the offers I make deadlock on pretty much the commission amount, I . .more did not hire the agent why must I pay them for what I consider nothing given the charge. If this amount is paid, it increases the time the investment takes to get to break even, and the time it takes the buy price to meet the market price. Suggest that they sellers canvas what agents are selling properties for, deduct 7% plus VAT, pretty sure you will sell close to your asking price. PS do not make the mistake of trying to get the agents value as you are 7.7% overpriced, selling without the agent is about getting your required price not making their commission as well. . .less by Andrew on November 21 2009, 10:56 Find this comment inappropriate? Report it

@curios george Agent commisions: Remax in the west rand - don't want to go below 6.5% - according to the agent that .5% was a generous discount. Average according to her was 7 - 7.5% by Daniel on November 22 2009, 11:54 Find this comment inappropriate? Report it

@ Andrew, not sure I understand you? Are you saying drop your price by 7% and sell yourself? I would rather let the agent do the work and get the 7% vs me doing the work and still getting the same money out at the end of the day... hello.... Am I missing something? Either . .more way time is money and if I am selling it myself I want to make the 7% or if I work for free selling my own house I would rather a agent use his time and get paid vs my time and walking away with nothing extra in my pocket.. surely?? . .less by Brennan on November 23 2009, 17:14 Find this comment inappropriate? Report it

@ Johnny Hey all stop moaning and you do the work then for 2%. LOL Good Luck. It would be great to see some of these dim witts try and sell a house. Most of you non agents don't have a clue and that is why we work really hard to get you the best price. IE you . .more being the dimwit would sell for R500k something you bought 10 years ago for R200k and think it a great return. Then we come along sell it for R800k take our R80k and you get R720k and now we are over priced. LOL We are around because we know what we are doing and attempt to get the best for you, otherwise there would be no need for us. Go off and do it your self and stop moaning and take your 500k LOL . .less by Estate Agent on November 23 2009, 21:44 Find this comment inappropriate? Report it

@ Estate Agent So who is the dim in dim WITT by amused on November 25 2009, 06:41 Find this comment inappropriate? Report it

Commission By the comments I've read, it is obvious that many property owners don't understand what it costs to sell a home. Add time spent taking purchasers to view a dozen properties, include petrol spent and advertising costs, show houses,etc, each single . .more commission earned can represent several weeks of work. At the end of the day it is a service for which a fee is attached. You could of course do it yourself. Good Luck! . .less by Estate Agent on November 25 2009, 07:29 Find this comment inappropriate? Report it

COMMISSION To The Ignorant comments I have just read! Do you know how hard we work? Yes, Estate Agents actually work? Long hours, afterhours, on week ends, in the evenings, Often our families don't see much of us. etc. Our work is like any other Job. What % do . .more you think a Broker earns out of that monthly premium you pay for that Fancy Insurance policy you want at the end of the day? Yes, Pick on the Estate Agents, but you don't have to use an Agent to sell your property. TRY doing that alone! And good luck to you too! . .less by PE AGENCT on November 25 2009, 09:28 Find this comment inappropriate? Report it

Commission If it was so easy to sell your home nobody would need Estate Agents. I feel we should move to lower commission but the seller conytributes to the advertisng costs of selling the property. That way we would stop wasting time with so many overpriced . .more properties in the market as the seller would be reluctant to waste his/her own money on fruitless advertising. No one is forced to uses agents, the comments on this page are a bit narrow minded for me. . .less by Fred on November 25 2009, 14:41 Find this comment inappropriate? Report it

Cutting of commisions - No I do not think so! If it was so easy to sell your house why not do it yourself? The reason is because it is to much hard work! Buyers phoning late at night over weekends. Have you thought of the process it self. Starting at marketing, adverts, phone calls, e-mailing buyers . .more making appointments to view other homes. Buyers no turning up for appointments then you have to phone and cancel with the Sellers like a fool! Not just that then taking the offer, presenting it to the Seller then the financing process the the registration process. After all this hard work we as agents needs to pay 14% VAT, 25% PAYE and split it with your principal. Working on R 50 000 comm you might see R 16 000. Would you as the Seller do all of this for this amount. Please let me know who is willing to work 7 days a week 24 hours with maybe a 3 week break for the year! . .less by !@! Estate Agent on November 25 2009, 20:07 Find this comment inappropriate? Report it

SELLING OF PROPERTY It is very easy to make NEGATIVE comments on the commissions an "ESTATE AGENT" earns. Possibly ignorance in the property selling field is the reason for these NEGATIVE comments, let me assure you a great deal of time and dedication is spent on selling a . .more families home, not to mention the cost to advertise this property by the agency. Please also remember, your local estate agent now has to become certified in this field of "REAL ESTATE", and most of us - including myself as a principal, SELL IN THE DAY and SOMETIMES INTO THE NIGHT and ON WEEKENDS (when you are enjoying your family time!). How about sitting a show day on Sunday with one of your local estate agents, possibly you could learn a great deal of respect for us "ESTATE AGENTS" . .less by Julie on November 26 2009, 08:11 Find this comment inappropriate? Report it

Agents Commissions Hi Jacky. Please do me a favour and read the article in THIS publication by Dr Willie Marais, who actually did research before writing his article! Is there perhaps a chance that you dont read REALESTATEWEB yourself? by Mike on November 26 2009, 15:04 Find this comment inappropriate? Report it

Which article, Mike? Hello Mike - please send me the url: news@realestateweb.co.za. We have published many articles by Dr Marais. by Jackie Cameron on November 26 2009, 15:58 Find this comment inappropriate? Report it

Commission we are worth it!! It is a pity the writer didnt do her homework and find out what the cost is for an estate agent to run a successfull business and assist the clients to their best ability. we need to be skilled in Marketing (pronted and web), data analysis, Photography, . .more demograpics and area info, personal relationships (counseling, mediating, motivating and encouraging), legal matters (legislation that impacts on the industry), contracts (to draw up a contract that is enforceable, but still fear to both parties), do financial qualifications and anvice, keep updated with the loan creterias of banks, building regulations and restrictions, valuations, hosting events (show houses, expo's, sponsorchips) all of this, with no private time and very high advertising costs? when the writer of the article and the people that feel the same way receive their salaries ant the end of the month, remember we dont have that luxury!! . .less by Estate Agent on November 30 2009, 08:02 Find this comment inappropriate? Report it

Name
Subject
Comment