We’ve recently seen different real estate property platforms offering services to home sellers at heavily discounted commissions/fee structures vs. traditional real estate agencies. The question now arises whether such models make the input of a real estate agents still necessary. Given these additional options available, where do agents fit in?
Does The Property Market Still Need Estate Agents?
With a number of new property platforms employing models that ‘cut out the middle-man’, and in doing so asking for much lower commissions for connecting sellers with buyers, the question of why use an estate agent at all has been asked.
“These kinds of businesses aren’t new, they’ve been around in some version for years, but if you’ve ever bought or sold a property, you’ll quickly find out that buyers and sellers hardly ever agree on anything (having competing interests in the matter) and that the services of an experienced, neutral party are indispensable,” explains Steven van Rooyen, principal of Leapfrog Property Group Sunset Links.
What do estate agents actually do?
An estate agent’s job is multi-faceted: they evaluate properties to ascertain a reasonable sales price – which they can only do if they’re knowledgeable about the area, what kind of prices houses are selling for, what the buyer demand is looking like etc.
They then take on all of the risk and cost to market the property; on online portals, in newspapers, on social media, with brochures and the like. Agents also conduct show houses, work from a database of qualified buyers that are looking in the price range and possibly the area of the property and ensure that new interested buyers can actually afford the property.
Once a willing and able buyer is procured, the negotiation starts between buyer and seller via the agent to make an offer on terms and conditions that are acceptable to both parties. A professional agent will guide both parties through the process – often assisting with recommendations for bond originators, conveyancing attorneys, helping to obtain the necessary certificates of compliance etc.
Why pay commission?
An average estate agent’s commission is between 5% and 8% of the sales price, and many sellers question having to pay for a service that they don’t quite understand, says van Rooyen.
“An estate agent is not just an area expert in terms of the local property market, they’re ‘au fait’ with all of the financial and legal transactions inherent in a property sale, are professional negotiators and, occasionally mediators that guide both the buyer and the seller through one of the largest financial investments they’ll ever make.”
Kevin Wearing, principal of Leapfrog Property Group Gordons Bay, explains commission: “I work for 7.5%, and for that, you’ll get the benefit of my knowledge, experience, database and marketing infrastructure. I bear the cost and the risk if this property doesn’t sell. If I don’t sell the property in the timeframe stipulated by my sole mandate, the owner can give the contract to someone else so the expense and risk really do lie with me, not the seller. If I sell the property, I’ve earned my commission.”
Michelle Cohen, principal of Leapfrog Property Group Johannesburg North East, questions claims from agents and companies stating they’ll only charge a 1% or 3% commission:
“Someone will always offer something seemingly more attractive, but if you can’t negotiate your commission, how are you going to negotiate the best price for a seller’s property? Also, what else are you undercutting in your offering?”
Questions to ask your estate agent
Wearing advises sellers to ask a few questions before offering an estate agent a sole mandate to sell their property, namely; whether they’re based in the area (do they have an office there, do they specialise in the area), what their qualifications are and, most importantly – whether they can provide the seller with a list of properties they’ve sold in the area?
“An area expert will be able to show that they’ve been working in the neighbourhood and have successfully sold property there before. Naturally, this won’t apply to new agents, but in the case of an established agent, this should be provided. In the case of a new agent, sellers can ask for a layout of how the property will be marketed (the agent should provide a written marketing plan), and what sort of support the agent will be getting from his or her franchise,” advises Wearing.
This article was issued by Leapfrog Property Group – http://www.leapfrog.co.za/