Do Agents Earn Too Much Commission When Selling A Home?

If there is something that every homeowner struggles with (some more than others) when they decide to sell a home and that is the commission percentage the real estate agent charges.

It has often been branded as ridiculous or completely unaffordable and many people often ask whether or not agents earn too much commission.

It is no secret that the general public believes they earn far too much for the (‘little’) amount of effort they put in.

Perception vs. reality

So, is the public’s perception true or has there been a false image created by society?

According to recent research, the average basic salary of a real estate agent in South Africa is about R8,000 per month.

Indeed a rather surprising number to hear!?

Yet, this is despite the long hours (plus weekend work) they put in and the effort it takes from their side to sell a house on behalf of the homeowner.

Risk-based selling

The truth is that real estate agents all sell houses based on risk: they have to make sure that they actually sell the house in order to get a decent commission. And because this is such an unstable working environment, they have to incur costs that the public does not know about in order to complete the sale of the house.

Advertising is a major expense and the agent can’t just make use of social media advertising to get it done: print media plays a huge role in the selling of a house and advertisements in magazines and newspapers do not come cheap.

Media houses charge between R25,000 and R35,000 for a full-page magazine advert. Weekend newspapers costs can reach R11,000 per full page in the property section. Online marketing is not as easy as it looks either and it can become quite expensive in order to generate traffic. Agents have to put in hours of work to ensure that the material they come up with is SEO-friendly.

And it doesn’t stop there!

Unfortunately, agents are on the phone all the time busy with important calls pertaining to a sale. They are also on the road more often than not in order to try and make that next home sale.

And even after all of these factors, they cannot say for sure that they will be the one selling a house!

Yes, there are agents who do very well, but let’s not forget the long hours that those guys put in – some agents work 7 days a week whilst other people can look forward to a relaxing weekend off.

Current real estate model

The business model of an estate agency itself requires agencies to charge commission rates (which is mostly on a 50-50 split). So, if the agent earns R8,000 per month, that means that the agency also earns R8,000 per month.

It goes without saying that agencies that sell top of the range properties can afford to negotiate the commission rate as fewer houses are sold in that market per year, but nevertheless, they need to be rewarded accordingly for their efforts.

Along with the long hours and the hard work, real estate agents have to undergo training and certification before they can even think about selling a home. And agents must reach a certain level of rigorous training to ensure that they keep up to date with the changing real estate laws and legislation.

Then, there are cases where a mandate is given to more than one agency which means that the competition is stronger. If the agent is dealing with an overpriced property, then it will take even longer to sell, which means that advertising will have to run for a longer period of time, thus the expenses will be much higher.

Once the agent has establish him/herself in a certain area, other non-local agents will start recommending clients to that agent, whom will then be responsible for paying out real estate referral fees.

If you sell your house, bear in mind that real estate agents work in a very uncertain environment and they will make sure to put in the necessary extra effort to get your house sold!

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