When does an Estate Agent earn a commission?

Posted On Tuesday, 05 July 2016 08:02 Published by
Rate this item
(0 votes)

Buyers and sellers alike often see an estate agent as a necessary evil when it comes to purchasing property.

Bruce_Swain_MD

However, a property transaction is very complex, and often the biggest financial decision most South Africans will ever make and, for most it’s imperative to get the right advice and guidance throughout the process. Unfortunately a number of unscrupulous and inexperienced estate agents have damaged the reputation of this essential profession.

What an Estate Agents Brings to the Table

A qualified estate agent has an extensive knowledge of the local property market which means that he or she knows what properties in the area are selling for, and is therefore able to make the most accurate valuation of a seller’s property. Such an agent is also able to assist buyers in terms of valuations and with regards to important questions to ask every seller about property defects.

“In any property transaction there is a mismatch of intent; the seller wants the best possible price for their home, while the buyer wants to pay as little as possible”, says Bruce Swain, MD of Leapfrog Property Group, “Essentially an estate agent serves as a skilled negotiator, working to obtain the most favourable result for both parties which can be very time consuming and complicated”.

Swain goes on to mention that signing the offer to purchase is only the first step in a property transaction; there are a number of intricate legal steps that still need to be completed and a qualified estate agent is trained to guide both the buyer and seller through the process.

When an Estate Agent Has Earned a Commission

“What most buyers and sellers don’t necessarily realise is that an estate agent only makes a commission on a property when a sale has been successfully concluded. That means that all of the funds they spend on marketing and showing a property can only been recouped if the property sells. If, however they lose the mandate these expenses fall to them, not to the seller”, explains Swain, “As such it’s imperative for agents to offer professional, expert service in order to ensure that a sale is successfully completed”.

Legal firm, Smith Tabata Buchanan Boyes recently released a list of conditions that have to be met in order for an agent to earn their commission.

These state that: 

  • the agent was mandated and held a valid Fidelity Fund Certificate (buyers and sellers can ask an agent to produce this certificate which proves that they have the necessary qualifications and are registered as agents as required by law);
  • the purchaser was, when the contract was signed, willing and able to purchase the property (this also implies that bond pre-approval was done and checked by the estate agent);
  • the seller and purchaser entered into a binding agreement;
  • the agent was the effective cause of the sale; and
  • all suspensive conditions in the agreement have been met (a suspensive condition suspends rights and obligations until the sale occurs. Once the sale goes through, the suspended part of the contract (or indeed the entire contract) is brought to life). It is also the responsibility of the agent to help negotiate and advise on all suspensive conditions.

“Managing the sale of a property; right through from advising the sellers on how to price the property correctly, marketing it (at the agent’s own cost), finding a buyer and navigating the sales process is an extremely time consuming process which often doesn’t succeed (for example the buyer pulls out or there is a disagreement on the conditions of the sale). However when the above conditions have been met, the agent has certainly earned their commission”, explains Swain. 

Last modified on Tuesday, 05 July 2016 08:28
" "

Most Popular

Equites Property Fund to list on A2X

Jun 25, 2019
ANDREA TARVENA
Equites Property Fund Limited has been approved for a secondary listing on A2X Markets…

McCormick Property Development Celebrates the Opening of Katale Square

Jun 29, 2019
 JASON MCCORMICK
McCormick Property Development celebrated the launch of its 66th development with the…

New standard bank deal will make it easier for self-employed professionals to qualify for the mortgage bonds

Jul 03, 2019
 STANDARD BANK
Ever since the tightening of credit rulings in the South African economy which followed…

Hyprop reduces exposure to Africa and provides pre-close update

Jun 29, 2019
MORNE WILKEN
JSE specialist shopping centre REIT, Hyprop, today announced progress on its strategy…

Twin City to develop new R230m mall in Vryburg, North West

Jul 10, 2019
 TWIN CITY
The North West agricultural town of Vryburg is set to get its first enclosed shopping…

Please publish modules in offcanvas position.