All your questions about estate agents’ commissions answered

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 5% — 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, equal to a percentage of the house sale.

We answer your questions about estate agent commission fees and show why an estate agent is worth the expense. After all, your home is your most valuable asset, so it’s best to entrust it to professionals.

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:

• The seller has agreed to a contract with a buyer.
• All conditions stipulated in that contract have been met.

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 registered, which usually takes around 6 weeks.

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

However, bear in mind that if a prospective buyer refuses to go ahead with the purchase, but changes their mind later and purchases 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 5% — 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 agent may be willing to take you on for a lower commission rate, as their chances of selling the home are higher.

Save on the estate agent commission? We advise not

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.

Remember the value of an estate agent

Whatever your concerns 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 contacts database.

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, can submit your application to multiple banks (including your own), granting you the opportunity to compare deals and interest rates.

We also offer a range of tools that can make the home buying process easier. Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.