WHY AGENT COMMISSIONS SHOULD NOT BE CUT

How often have we heard people grumble about having to pay an agent's commission when selling their home... and sometimes doing their utmost to try to get agents to cut down on their fees? OWEN DORMEHL, co-owner (with Tau Phalane) of the countrywide Dormehl and Phalane Property Group, discusses the issue with BILLY SUTER.

ESTATE agents invest money and time in the marketing of property, with no certainty of earning an income. It's a high-risk job, so a fair return is expected, says Owen Dormehl on the subject of agents' commissions.

"Estate agents in South Africa do not earn a fixed income and work only for commission. All work is done at their own risk, and they only secure their income on concluding a successful sale," he adds, further endorsing the "fair is fair" sentiment.

He adds that there is no fixed, prescribed rate, so clients need to consider the amount of work done by an agent regarding the amount of commission payable. Sellers should look at the marketing strategy and plan to determine the value in lieu of the commission, he explains.

"If an agent cannot successfully negotiate a normal commission and has to cut the rate to secure business, how confident can you, the seller, be that the agent can negotiate the best possible price for your property?"

"Low commission could reflect that your property is overpriced to a potential purchaser. Also, when commission is lower, the agent could consider spending less on marketing and get you to accept a lower offer than the true value of your property."

Dormehl believes commission must not be seen as a cost, but rather as a value: "It is true to say that it's not what you pay, but rather what you get in return, that ultimately counts".

It is important that the seller be aware of an agent's expenses to obtain a purchase price. This could assist the seller in making a decision on a fair commission amount.

The seller should want to motivate and encourage the agent to sell the property, therefore offering him a fair commission, adds Dormehl.

"What other profession or industry offers a client the opportunity of paying only if and when services are fully and satisfactorily rendered? In other words, unless an estate agent can bring to the negotiating table an offer, at the price and on terms acceptable to the seller, he does not get paid.

"He earns commission and only gets paid for results - that is when the house is sold and transfer is effected."