Commission Cuts to Stay in Business
The information in this article is courtesy or Realestateweb (Property sales, rentals. Will you pay less commission? - 21 November 2008)
Realestateweb reports that more and more properties are spending more than 20 weeks on the market. This has urged some agents to offer discounts on commissions charged for selling homes – some of them dropping their commissions to below 5%.
One of these agents is Andre Le Sueur, an estate agent for Property100 Pretoria. He says that lowering his commission has helped him sell more property. He feels that charging 7,5% commission might cause you not to sell anything at all. However, says Le Sueur, some sellers still ask for discount and sometimes he even gives them 1% on below 5% commission.
Jerome Khambule of Khambule Estates in Durban said that rental commission of less than 5% is a huge blow to income as there are many bills to pay. According to him his agency charges 7,5% and he thinks that less than 5% is not good for business. Fine and Country’s CEO shares Khambule’s views on this.
“When agencies start operating under the rate of 5-6% commission, they are moving into the danger zone. Currently with so many agencies closing, the public will have no choice but to appreciate a higher commission rate for an all-inclusive quality service.”
She added that unrealistic cuts just to get business will not benefit the client for there will be little guarantee that funds for marketing will be available. She feels that fees should be cut when markets are stronger and more buyers are present.
“It is common in South Africa for home sellers to negotiate the estate agent's fee, however in most cases it is simply just accepting that the fee is less but the activity and marketing are the same.”
Erasmus warned that when agents become to desperate and cut commission below 3%, the activity will also be cut to zero in some cases.
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