Scenario: You’re expecting a new addition to the family in the upcoming months and you’re interested in upscaling to a bigger house.
You elicit the services of an estate agent to assist with the purchase of your new home and/or to sell your current home. The estate agent marketed your property well, a willing purchaser was identified, and a contract signed and sent to the attorneys to deal with the bank and the transfer of the house.
When buying and selling a home, one can do so privately or use an experienced estate agency who are well known in your area. The agent will normally ask you to enter into an agreement with them, called a mandate which is the “contract” regulating the relationship between you and your estate agent concerning the purchase and sale of your house.
This agreement sets out when, where, how and how much commission the agent is entitled to. This commission is the fee payable to the agent for the agent’s efforts by, for example, introducing a willing buyer to you and being, what is called the “effective cause of the sale”.
The mandate will specify the estate agent’s services and sets out when, where, how and how much commission the agent is entitled to, as well as the party responsible for paying the commission.
Commission is the fee payable to the agent for them being the effective cause of the sale by introducing a willing buyer to you.
One can negotiate with the estate agent on the percentage of his/her commission, provided that said commission is determined or determinable in the mandate.
Although a mandate may determine otherwise, an estate agent’s commission is normally only paid once ownership of the property has been transferred to the purchaser.
Once the mandate has been fulfilled, the agent is entitled to payment for his or her services, however, there is one further aspect that a large number of the public are unaware of.
Before an estate agent is entitled to payment of his or her commission, they must, firstly, be registered with the Estate Agency Affairs Board and be in possession of a valid fidelity fund certificate issued by the board.
Failing to register as such and conducting business as an estate agent or agency can bring about criminal sanctions. Having a fidelity fund certificate offers the purchaser and seller the peace of mind of knowing that the estate agent is qualified, renders his/her service in the best interest of the public and has safety measures in place with regards to insurance and security.
Another aspect of agent’s commission that we regularly deal with is where the agent introduces the potential purchaser to a property, but the seller and purchaser negotiate with each other at a later stage without the estate agent to try and save on paying the commission.
The estate agent will still be entitled to commission if he/she can show that his/her introduction of the purchaser was the effective cause of the sale.
Therefore, to conclude we would advise any seller that wants to contract with an agent or agency to make sure they are reputable and to confirm all aspects of the commission prior to contracting.
Conversely, we would advise agents to make sure that they are compliant and that their documentation is in order to ensure that their commission claim is good in law.
For any further information on this topic, you are welcome to contact us on 011 897 1900 or info@tuckers.co.za
Article contributed by Kenny Smith and Stacey Bonser of Tuckers Inc.
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