Commission-discounting real estate agencies, mainly owned by lawyers, are savaging the traditional agencies over the latter’s high commission rates, ranging from 7% and sometimes up to 10%, depending on the complexity of the deal.
As the fight gets nasty, the likely outcome will be commission cuts by all agencies, says attorney Laila Conlon, whose legal firm incorporates Conlon Prop, a 3.5% agency.
“There is no way realtors, mainly the big franchise operations, should be charging the amounts they do,” says Ernst de la Querra, principal of 3%.com, and an attorney.
He is scathing about commissions.
“They simply cannot justify it. Many sellers are cash-strapped and the situation is getting worse. Reducing cost is common sense, but especially so for desperate sellers, who simply have to sell for their financial survival. Why, sellers should be asking themselves, should they pay much more than they need to? Commission on a R1m home is R70,000. Why give away R35,000?”
Pam Golding Property (PGP) Real Estate Services general manager Anthony Stroebel has a simple comeback.
“You get what you pay for.” He does, however, concede that the industry has not “taken the time to properly educate the public as to what they really do”.
The exceptional service offered by many seasoned agents is a point readily conceded by De la Querra.
“There are still great agents out there. But knowledge built up over time has no proprietary value. Every detail is on one of many electronic platforms. A quick search provides buyers and sellers with everything they need to know. So what are people paying for?”
Conlon agrees, saying big agencies cannot continue to justify high commissions, as computers replace legwork. If they do, they face being redundant, and the industry is “likely to collapse, and in fact there are already signs of it. Everything about selling a home has changed, except commissions. If the big boys keep defending outrageous commissions, they are on their way to extinction”.
Top agencies can justify commissions because agents have to manage two diametrically opposing desires, says Stroebel, and it takes experience, skill and training.
“The seller, who wants the highest price and the buyer, who wants the lowest. This ‘dance’ requires extremely adept human skills and an understanding of sales psychology.
“Clients who choose these ‘lesser offerings’ referring to the lawyer agencies, need to be aware of this.”