by Mark Bechard | Personal finance
The overwhelming majority of homeowners go through an estate agent when they sell their properties, paying commission of five percent, on average, excluding VAT. But do estate agents really earn their keep, and, in our online age, is it necessary for sellers to pay someone to market their homes?
A colleague recently sold her house for R3.4 million. The offer that she accepted was made within five days of the property going on the market. The agent advertised the property once, held one show day (when the offer to purchase was made), and brought a few people to view the house. The agent earned commission of R193 000.
As a general rule, the cheaper your property, the higher the percentage you will pay in commission. Most sellers are charged between 5.5 and 7.5 percent, plus VAT, whereas sellers at the very top end of the market – we’re talking properties worth R50 million or more – pay two or three percent, or even a negotiated fixed fee.
Although the agent’s commission is deducted from the price realised by the seller, in a sense the buyer pays too, because, when setting a price, the seller must build in the commission. Most buyers have to finance the purchase; the higher the selling price, the bigger the home loan they will have to take and thus the more interest they will have to pay over the term of the loan.