Be smart about agent commission
Selling a home for full value within the current economic conditions is challenging, which makes the services of a real estate practitioner invaluable
WORDS: MARANA BRAND • IMAGES: SHUTTERSTOCK
ellers are sometimes reluctant to call in the services of an agent to assist with marketing and selling of their homes, mainly citing paying commission as an “unnecessary” expense.
But, especially in the current situation where buyers base many of their decisions in choosing their next home on online information and virtual tours, and because agents have strict health protocols to adhere to when it comes to physically viewing a home, an agent may be the only way to a successful sale.
There are, however, various other reasons why a seller will benefit from using a real estate practitioner, says Adrian Goslett, regional director and CEO, RE/MAX of Southern Africa.
“Apart from the advice provided throughout the process, real estate practitioners have the expertise to help sellers realise greater profits from the sale of their home. This will be essential to sellers who hope to sell their homes for full value over the next few months as our economy recovers.”
The first way real estate practitioners can help their clients sell for full value is to let sellers know what the true market value of their home is within the current market conditions.
“Sellers often overlook the importance of pricing the home correctly from the very start. A listing that sells within the first three months of having been listed, statistically will sell for closer to full value than homes that remain on the market for longer. To achieve a timeous sale, the home needs to be marketed at a price that aligns with buyers’ expectations for a home of that value.
“If the home is overpriced, it’s likely that the property will remain on the market for longer. The longer a home is on the market, the more likely buyers will make cheeky, low-ball offers. Listening to the advice of a reliable local property expert will help sellers set a realistic asking price and avoid this outcome,” says Goslett.
As experts in their local market, agents can advise sellers and let them know if a buyer’s offer is worth accepting.
“A real estate professional will know how active the local market is and can provide insight into whether the seller stands a chance of receiving a higher or better offer. They’re also expert negotiators and can negotiate with the buyer on the seller’s behalf. Sometimes an estate agent can negotiate an offer that’s anywhere from R10,000 to R100,000 more than the seller was initially willing to accept,” Goslett highlights.
Show & tell
As another benefit, real estate agents are often able to provide staging advice that can add immense value. “Knowing what buyers will haggle down prices for, a real estate practitioner can advise a seller on the key points that need to be fixed, updated or renovated for the home to fetch a higher selling price. Given that we’re in a buyers’ market, this advice will help sellers stand out among the local competition and increase their chances of selling,” says Goslett.
When renting out your property, an agent can make your life much easier too, taking over several unpleasant responsibilities often part and parcel of having a tenant. Again, some landlords may be reluctant to call on an agent’s help and may think waiving about 10% of the rent is too high a price to pay.
But, says Gerhard Kotzé, MD, RealNet estate agency group, managing rental properties – and tenants – is becoming more complex, and there aren’t many private investors with the specialist knowledge or time to do so. “They need help from properly trained and qualified letting agents who also comply with the relevant legislation and regulations.”
According to him, many landlords find that the 10% going to a rental agent isn’t a high price to pay for the peace of mind that comes from someone managing their leases, tenants and, if necessary, properties in their absence.
The main advantages of a professional handling your letting affairs are better tenant selection, and better rent collection.
“In addition, by hiring a letting agent, you put a buffer between yourself and the tenant. You don’t have to listen to excuses, chase down rent, or be the ‘bad guy’ if it becomes necessary to evict the person living in your property. Agents also have an advantage because tenants usually realise that they, unlike the owner, are just doing their job and are obligated to enforce the lease terms. In fact, many agents say that it’s considerably easier to manage other people’s properties rather than their own, for this very reason,” Kotzé says.
Selecting your agent
A personal recommendation always helps, Kotzé says, but preferably choose an agent who already manages a portfolio of rented accommodation and can provide references from other landlords.
“Next, you should make sure your agent is registered with the Estate Agency Affairs Board, has a trust account for clients’ money, and only takes commissions from landlords (not from tenants). It’s also preferable that the agent or agency is a member of one of the established national real estate groups, as it improves the chances of the agent using tried and tested management systems and complying with a number of acts and regulations that are specific to property letting.”
After making your choice, it’s likely that you’ll then be asked to sign an agency agreement or “letting mandate” that covers the agent’s right to let the property on your behalf and manage it during the tenancy.
“You must make sure that you read this, and don’t sign it if there’s any part that’s unclear or that you don’t agree with,” Kotzé says.
Similarly, you should check out the lease agreement your agent will be using. “If there are any special instructions you want your agent or tenant to follow, you must put them in writing, date them and keep copies in a clearly marked file. Remember that the agent always represents the property owner (landlord) and cannot and should not do anything without the express mandate of the owner.”
However, once you’ve reached agreement and the agent knows what you expect, it’s time to back off and let the agent do his or her job, Kotzé says.
The hazards of trying to sell privately
Selling your home yourself and keeping the commission in your pocket instead of paying it to an estate agent may sound like a good idea, especially in a slow market, but you should be aware of the dangers before you decide on this approach.
“We find that most DIY or private sellers are homeowners who need to sell to get out of financial trouble, and have taken this route in the hope that saving the commission will mean they won’t have to ‘pay in’ to settle their home loan after the sale,” says Berry Everitt, CEO, Chas Everitt International property group.
Unfortunately, they often fall into one of the many potential pitfalls of selling privately, and end up even worse off. “We see this every day, and we would like people to be aware of the hazards,” he says. These may include the following:
You carry all the costs of advertising and marketing, whether or not you sell your home. You’ll have to try to gauge which advertising media might be most effective, and place and monitor your own ads. You’ll also need to get your own for-sale boards made and put them up and take them down in accordance with your local authority’s signage bylaws.
You’ll need to organise and run your own individual viewings, which come with all sorts of complications and legal requirements because of Covid-19. “A reputable agent will be following the strict industry guidelines for viewings, and your risks will be significantly lower as a result,” Everitt says.
Lack of exposure
Most private sellers don’t have the knowledge or resources to expose the property to a big enough pool of potential buyers and create enough awareness. “Good estate agents, however, will have access to existing buyer bases as well as national and international advertising and marketing channels,” he says.
Lack of market knowledge
If you don’t have access to the latest sales records and statistics, it’s very difficult not to over- or under-price your home with regard to the current demand in your area. And buyers are so savvy these days that if your home is overpriced, no-one will make an offer; while if it’s priced too low, you’ll lose out financially and defeat the purpose of selling your own home in the first place.
Lack of experience
Most buyers are tough negotiators at the moment, having done their homework and research. The first thing most will tell you, for example, is that if you’re selling privately and not paying commission, the saving should go to them and not you. “Most sellers are also not practised negotiators and will find it difficult to achieve the detachment necessary to reach a mutually beneficial agreement.”
Legal and liability issues
Apart from the need to achieve familiarity with sale agreements and all sorts of other legal documents – or to pay an attorney to check them – private sellers potentially face all sorts of liability issues when they’re dealing with a buyer one-on-one. The Consumer Protection Act is just one of the minefields that have to be crossed to achieve a successful sale.
There may be many people wanting to buy but, with the banks being so strict on credit, they may not qualify for a home loan. “It’s very difficult for private sellers to establish the financial capabilities of potential buyers or worse, people who are trying to ‘scam’ them into giving them occupation of their homes.”
As a private seller, you have no screen between you and potential buyers – or potential crooks who may use the opportunity to get inside your home and either steal things while looking around, or “case” the property and security systems to plan a crime.
If your home fails to sell because it’s overpriced or underexposed, you’ll just have to keep on paying your bond, rates and taxes, electricity and water charges, insurance premiums and security and maintenance costs – and these “holding costs” can quickly mount up to more than the potential saving of not paying an estate agent commission.