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All your questions about estate agents’ commission answered

The services of an estate agent are invaluable, but what does it cost? We answer questions you may have about the estate agent commission fees.

Estate Agent Commission

Article summary

  • The estate agent is paid a commission by the seller of the home, which amounts to a percentage of the home sale.
  • The standard estate agent commission rate in South Africa is 7.5%, but this can be negotiated.
  • Estate agencies take a lot of risk onto themselves, as they invest a lot in marketing but are only paid if the home is sold.

The services of an estate agent are a significant boon to anyone looking to sell their home, but of course, those services come at a cost, in the form of the estate agent commission. The estate agent earns a commission from the home seller, usually equal to a percentage of the house sale.

Here, we answer all the questions you may have about estate agent commission fees.

Estate agent commission: Who pays it and when?

The responsibility for paying the estate agent commission falls on the seller of the home, not the buyer, as the ultimate purpose of the estate agent is to help the seller find a buyer.
In short, the commission is paid when:

  • All conditions stipulated in that contract have been met.
  • When the property is transferred into the buyer’s name.

The estate agent receives the commission, provided they have played an effective role in bringing about the sale.

The longer answer to this question is that the seller and estate agent usually agree on a mandate when first entering into negotiations, and the estate agent is paid once they fulfill this mandate.

Bear in mind that a home seller can hire multiple estate agencies to sell their home. In cases where more than one estate agent has played a role in selling the home, the question of who receives the commission may have to be decided in court.

Do you pay estate agents if you don’t sell?

Since the fee is a percentage of the home sale, it is payable only once the home has been sold. The property also needs to be transferred, which usually takes around 3 months after the initial sale agreement has been signed.

The estate agencies are essentially taking all the risk onto themselves, as if the home is not sold, then the resources they have invested in the marketing campaign will not be compensated.

However, bear in mind that if a prospective buyer refuses to go ahead with the purchase, but change their mind later and purchase the home, the estate agent who played a role in attracting that buyer in the first place will be entitled to a commission, even if they didn’t play a role in bringing about the eventual agreement.

What is the normal commission rate in South Africa?

The standard commission for estate agents is 7.5% of the sale. However, there are no regulations governing the amount an estate agent should be paid.

So are estate agent fees negotiable?

They are, and if your home is in a good position to be sold (well-priced, good area, good condition etc) then an estate agency may be willing to take you on for a lower commission rate, as their chances of selling the home are higher.

That said, treating the estate agent commission as an opportunity to save costs is not recommended. The less you pay the estate agent, the less budget they have for marketing your home, and it also motivates them to sell the home quicker, which means you may not get as good a price.

Why are estate agents so expensive in South Africa, compared to other countries?

While it’s true the 7.5% commission rate is higher than, for example, the UK; where it’s around 2%, you need to bear in mind the differences in the market. UK homes are usually priced higher, and there is a higher turnover rate, so UK estate agents generally make more profit off the 2% rate than South African agents will off the 7.5% rate over the same period, as they sell more houses at a higher price.

It has to be said that South African estate agents are well worth the commission rate they charge, as they are operating in a difficult market that is currently experiencing a lack of demand and house price deflation in high-end areas.

Remember the value of an estate agent

Whatever your concerns may be about the commission, remember the value of an estate agent’s skills, and the advantages of employing an estate agent versus selling the home privately. They conduct the marketing campaign, showcase the house, advise the seller and offer access to a sizable database of contacts.

Once your home is sold, if you’re looking to invest the funds in another property, bear in mind that ooba Home Loans — South Africa’s largest home loan comparison service, offers a range of tools that can make the home buying process easier. Start off with their home loan calculators; then use the ooba Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.

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