Estate agents cut commissions because of economy

While predictions are not all doom and gloom, it is widely accepted that properties are taking longer to dispose of and that homeowners are holding onto their assets for now, hoping to get a greater return on their investment when the market improves.

The Institute for Estate Agents of South Africa (IEASA) discourages agents from lowering their commission, adding however that the market does affect negotiations around this payment.

The average industry commission ranges between 4 and 8%, but Moneyweb has learnt that some agents are prepared to drop way below this, sometimes settling for as little as 2 or 3%.

It must be stressed that this applies mainly to the smaller players in the industry. Giants like Seeff, Lew Geffen and Re/Max among others, usually stick to their prescribed rates, depending on the relevant market segment.

Seeff’s national marketing manager, Ted Frazer, says if one looks at the real estate industry - residential or commercial - it is made up of a significant number of small independent players who compete strongly on price in terms of their commission.

The heavyweights mentioned above offer a much bigger infrastructure to sellers and have a significant marketing platform. This costs money. But because clients know that these are bigger players, they are not averse to footing the commission bill.
The larger estate agencies also attract a much broader base of buyers and are able to zone in on the right buyers for a particular property.

Frazer says smaller operators are struggling in a tough market and competing with the bigger players, prompting them in some instances to cut their commission.

Estate agent Arthur Venter of Property Circle in Ramsgate on the KwaZulu-Natal South Coast is adamant he will not compromise on commission. “I don’t believe in it. Average stats show that an estate agent earns about R2 500 a month,” he says.

Agents therefore rely heavily on commission to supplement their income. Venter says he discusses his commission with clients upfront and sticks to his guns when it comes to payment.

His view concurs with that of IEASA which says professional and qualified estate agents put in long hours, provide sound advice and deserve their commission without having to compromise.

Nevertheless, some agents told Moneyweb that they need to settle for less than the specified commission in order to make the sale. At the same time, buyers and sellers also know that it is a tough market and will shop around for the lowest commission.

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