It’s just as well that some estate agents in South Africa are not subjected to the rigours of the Advertising Standards Authority (ASA), as some of the claims they make in their property advertisements are complete nonsense.
The point I’m making is that there are lots of advertisements that bend the facts, that “emphasise the positive” and “underplay the negative” aspects of a property.
The net result of this is that potential buyers very quickly stop believing what the estate agents advertise and from the moment they enter a showhouse, they’re determined not to be taken for a ride because they are suspicious about the estate agent’s motives.
And that’s my point: if there was a lot more honesty in advertising then buyers might have a lot more confidence in the agent they’re dealing with.
Added to this is the principle that the estate agent is really working for the seller and always has a vested interest in making sure that they get as high a price as possible. Of course, that’s not a bad thing, particularly in the prevailing circumstances where property sales prices offer real bargains.
So of course the agent wants to persuade (if that’s the word) the buyer to increase his or her offer to secure the home they’ve been looking at. And, with the new Consumer Protection Act (CPA) looming in October, estate agents may have to start being that much more circumspect about what they offer and what they declare.
But I think it’s time for some of the more established agencies (such as those that have nationwide franchises) to start reconsidering the model that has been used in South Africa for so long and perhaps start doing things differently for once.
In overseas markets there is a listing agent, a seller’s agent and a buyer’s agent. Exactly what the difference is between a listing agent and a seller’s agent is really not clear, but I would suspect that there is a commission split between the two parities. The buyer’s agent is the one that interests me most of all.
You see I think that some of the bigger agencies should, on a trial basis anyway, take the plunge and start offering a service to assist buyers when they are about to embark on the task of finding a new home from the resale stock that is readily available on the market today.
I certainly would use such a service if it was based on:
- Affordable fees linked to the bond and added on as a fee (such as the bond origination costs are);
- Providing real value for me (so that I didn’t have to schlep from one house to another based on a picture or two);
- Protecting me against latent defects, bad workmanship, suspect wiring, defective plumbing or any of the many other things that you can’t inspect properly when wandering around at a show day or after having a second look soon after that;
- Informing me about some of the other unknown hazards like traffic or loud music from the pub hidden behind those bushes just 750 metres away that happens to be closed Sundays and so forth.
There are many hidden pitfalls that no agent will tell you about when, for instance, you a looking at a beautiful townhouse complex in Lone Hill or Fourways on a Sunday at midday. For instance, coming from Cape Town, how would you guess that to get to Sandton on an ordinary working day you’d probably have to leave by 06:30 to make it into the office at eight?
After all it’s only a short commuting distance of about 12 kilometres. But it doesn’t matter which road you take (the highway, William Nichol, Witkoppen, via Sunninghill to Rivonia and then up through Morningside), you will be trapped in a traffic snarl-up that demands you carry a ration-pack, a hot thermos of coffee and several bottles of water at all times. Just in case.
I would love to be told about these pitfalls well before I signed the offer – and I’m sure many other people like me would like to know about them too. And let’s not kid ourselves because the agent who is acting from the seller invariably knows exactly what the traffic patterns are like.
I lived in Faerie Glen in Pretoria a couple of years ago and I had to drop my daughter at varsity in Hatfield by eight on two mornings a week. It would take me 15 minutes to get from Hatfield to Faerie Glen after I’d dropped her, but it would take me an hour-and-a-bit to get her there before eight. It was a nightmare – and the agent who rented the house to me said that traffic was really no problem because there are so many routes you can use.
A buyer’s agent would quickly warn me about these things – and warn anyone who was thinking of buying a property in one of those congested and overbuilt suburbs that there are just too many cars to fit on the roads at peak times.
I have no doubt, too, that banks and bond originators would welcome an agent acting for the buyer who was seeking a new property because they would have the added benefit of being certain that the rudimentary checks on the property were done. They’d also have an independent “buyer’s evaluation” and that the price being asked represented fair value and that the house itself represented a fair condition.
The notion that a bank inspector is going to vouch for the property is complete nonsense: all he or she wants to determine is whether there is sufficient value in the property to adequately cover the amount being borrowed. Inspectors don’t care if the plumbing works, if the foundations are solid or the wiring is up to maggots. That’s the buyer’s problem, not the bank’s.
So as a buyer you actually don’t have anyone protecting your investment for you: You have the agent acting for the seller trying to get you to increase your offer and you have the seller wanting as much cash as he or she can possibly muster from your account.
But who is acting for you?
There are buyers throughout the country who have the means to buy houses today and who are doing so on impetuous notion of kerb-appeal, perhaps backed by some scant knowledge of the property market (gleaned from friends and family). That’s it.
And I think that now, as the market becomes more sophisticated and more and more buyers emerge (particularly in the lower-priced sectors), there really is a need for an agent who will assist the buyer and provide a real, reliable and trustworthy service.
Buyers need as much guidance and protection as sellers do. And that applies in tough times and in good times.
Such a service will reduce the risk for the buyer, will protect the bank’s investment and will ensure that there are not a litany of complaints brought against estate agents under the new Consumer Protection Act (CPA).
And I think, most importantly, that these buyer’s agents should be registered through the Estate Agencies Affairs Board (EAAB) (as a sub-sector if necessary) and should have to undergo rigorous but fair scrutiny before being granted a licence to operate.
There is no doubt in my mind that such a service would be of value.
Now is there an agency willing to give it a go?
*Paddy Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice. Contact him at paddy@neomail.co.za.
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Your article has no doubt attracted the interest of many estate agents as well as consumers.
I write to you in the interest of Real Estate Education for Estate Agents and thought you might like some feedback on one or two of the points you raised?
1. The Estate Agency Affairs Act 112 of 1976 covers consumers when dealing with a registered estate agent, in that, the description of an estate agent – refers briefly: to persons [ie: estate agents] assisting buyers and sellers.
While the code of conduct refers to the agents client [ie: the seller, assuming that is the first party the estate agent comes into contact with and who confers a mandate on the agent for the purpose of selling/letting the property] it goes on to say that the agent has to protect the’ other’ party to the contract, as well.
2. All persons operating in the Real Estate environment in South Africa and who operate for the “purpose of gain” [ie: receiving remuneration or “other” rewards – on an ongoing basis] have to be in possession of a valid Fidelity Fund Certificate.
This would refer to estate agents who operate merely in the interest of buyers and who source potential properties for the buyer, after having obtained an instruction [ie: a mandate from a buyer] to find suitable properties on their behalf.
This would denote that the buyer is the agent’s client and the seller [assuming that the agent never had the sellers property on the books at the time of being appointed by the buyer to act on their behalf]. In this case, the seller would be “the other party” and whom the agent has an obligation to protect.
There are numerous companies employing estate agents in the capacity of “buyers agent”, most of which I am happy to report, hold valid Fidelity Fund Certificates.
Another import change to the new legislation, is that of the Voetstoots clause, which will no longer protect a seller who sells his property without disclosing defects, of whatever nature.
Thanks you for the very interesting article and I hope that agents and consumers alike, benefit from your writings. – Meryl Muller
Paddy, you are a legend!!!!!!!!!!!!!!
Just been at sheriffs auctions and the bulk of the deals are really ones that were overpaid in the first place.
I am a partner in a business that is a buyers agent for investors, therefore no mandates with sellers. There is a massive need when it comes to the buy to live market too.
Great article.
While I think Paddy’s idea has merit, I would also like to say that there are many honest Estate Agents out there who do perform a very good service to both buyer and seller. It all starts with the quality of top leadership and agents buying into the business’s values. Let’s be careful about tarring the entire industry with silly generalised comments. Continual ranting about a perceived the lack of ethics (which is not how I see the majority in the industry) is what perpetuates a bad image of real estate and this can only diminish one’s own importance amongst peers as a credible commentator for the industry. In my experience 90% of sellers use an agency that they think may be good, or they know of an agent they don’t wish to offend, or they deal with every agent in town, and so on. It is quite frightening how they choose their agent! Sellers may be selling their largest asset, yet they seldom ask several leading agencies to make a professional marketing presentation. That’s where it all starts folks! Choose the agency that commits to you with a professional performance guarantee, and vice versa. We should operate like most other countries do – there should only be a Sole Mandate. This would sort the nonsense out. Buyers and sellers have only themselves to blame. The credible players are out there. Use them and root out the rest!
However, fees for services provided by Agents are way overdue. Agents incur substantial costs serving prospective buyers and sellers and seldom recoup these. Estate agency operating costs have gone through the roof over the past few years while at the same time house sales have declined, selling prices have declined, and the agent’s rate of commission is always in question. So often the agent ends up being the ham in the sandwich having to compromise their “salary” to “make” a deal. So all in all I would welcome any debate that would generate fee income for agents. The debate however needs to go a lot further; agents provide far too many free services as it is. When I send my attorney a fax he charges me R45. When he sends me one, there is a similar charge. Possibly there should be regulated charges applicable to the real estate industry for services rendered. Such a move may help to ensure that only serious buyers and sellers work with agents. – John Fuller
Cherie Eilersen a training instructor and motivator introduced a Buyer’s Agent concept from America in 1995. I have been an Estate Agent for 20 years this year and qualified for the training course she ran in August 1995 as a Buyer’s Agent covering Ethics, Marketing & Agent relationships.
This concept not only assisted Buyers & Sellers with representation but also saved the Buyers unnecessary legal fees as transfer duty is payable on the Purchase Price which includes Agents Commission. When appointed by a buyer and representing them, the buyer then paid the agent commission and this was not included in the purchase price, this led to the purchaser not having to pay legal fees on agents commission.
The receiver of revenue realised how much money they were losing and changed the transfer duty act to say that agents commission is now part of “Immovable Property” and therefore transfer dutiable. They also insisted that the Estate Agents Affairs Board (Government dept of course) insist and ensure that no agent may act for the buyers benefit but for the sellers benefit to obtain the highest possible price for them. Our code of conduct does however provide for the fact that we should act for the mutual benefit of all parties. This of course being difficult in some circumstances.
The interesting fact around all of this is that Agents Commission is paid for a “Service Rendered” and therefore attracts 14% VAT. It also gets split between the Agent and Agency and the Agents portion attracts PAYE and the Agency’s portion attracts Company Tax.
Now isn’t it interesting that the Receiver of Revenue prevents Agents from legally (according to the Act & our Code of Conduct) acting for the buyer as well as charge Transfer Duty (TAX) on 14% VAT, PAYE & Company TAX that is all included in the Gross Commission amount on a Sale Contract.
The article written by Paddy is interesting and possibly should spark some further investigation into a Buyer’s Agent in SA, but whether it’ll be knocked down again by the Receiver for fear of Tax loss, I’m not sure. – Ursula Spennato
