The role of estate agents in a property sale

Private Property South Africa
Tahir Desai

“People generally wouldn’t try to get out of paying a garage bill or a doctor’s bill, but why then do sellers feel they can try and get out of paying commission to their estate agent?” asks Lanice Steward, managing director of Knight Frank Residential SA.

Over the years many systems have been developed to enable sellers to list and sell their properties in their private capacities, thereby excluding agents from earning commission but not one of the numerous initiatives for people to sell their homes privately have been wholly successful, said Steward.

“We need to examine the role that an agent plays in a property transaction,” she said.

First and foremost, the agent is not a seller of property but the negotiator or facilitator of the sale transaction between the registered owner (the seller) and the buyer. In many different spheres of business, there are negotiators who will act on behalf of two parties, managing the expectations of each to come to a mutual agreement. Although an estate agent has always been called a sales agent, in actual fact it is not the same as a person selling an item with a fixed price, such as a retail product.

An estate agent is a facilitator of the process whose role is to manage the expectations of the seller, who might want to receive more for his property than the market is wanting to spend, and the buyer, who is looking to pay less than the market-related price. The agent’s role is to facilitate the process of balancing the two parties’ expectations so that the meet on “middle ground”, said Steward.

There is a perception that if an agent is in a position to bring a buyer to a property and conclude a sale within 24 to 48 hours of listing it, that the commission payable should be reduced as the effort is not in direct proportion with the remuneration. This is not the case, said Steward, as certain skills are built up over time and are non-quantifiable. It takes years to gain the experience necessary to work as a professional estate agent who is able to conclude a sale on a property while achieving the right results, but with the least amount of stress or bother on the seller’s part.

Anyone can take a person to view a property, but in 99% of cases there is a degree of negotiation that needs to take place before a sale can be concluded, and that is what the agent is being paid for, she said.

In some instances, the seller and the buyer will collude to cut out the agent’s commission even though the agent has introduced them to the property, and according to statute law has become the “effective cause” of the sale.

This has recently been upheld by the courts in a successful commission claim on probabilities, in a case between Roux and Another v Magnolia Ridge Properties, where Roux Properties was given an oral mandate to find a buyer who would be willing to pay an acceptable price close to R55 million for the property. It was implied that Magnolia would pay commission at the generally accepted rate of 5% as well as the VAT.

Roux introduced a buyer, Zambli 216, to Magnolia Ridge Properties and a written option to purchase was signed, reflecting that Roux was entitled to receive commission on the sale. After many months however, and after having concluded two options to purchase, without any of the suspensive conditions having been met, Magnolia Ridge and Zambli concluded the sale agreement, which led to transfer of the property. The agreement, however, said that no estate agent was involved and that no commission was payable.

The courts found in Roux’s favour because the evidence showed that Roux Properties had introduced the buyer and seller and that no other agent had been involved. In addition, it was found that the parties stayed the same, the purchase price much the same and the agreements similar and that there was no other effective cause.

One of the ways in which sellers often try to get out of paying commission to the agent is to avoid signing mandates but if an agent advertises a home and holds show days, there is a mandate in place, albeit verbal – which then makes the seller liable for the commission payable to the agent who holds those show days or advertises, as this then would in all likelihood make him the effective cause of the sale, said Steward.

“If the agent has done the job he was assigned to do properly, which is to sell the home, the fee should then be paid, regardless of the time it takes or the perceived effort,” she said.

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