The truth about commission paid to Estate Agents

Commission is the percentage charged by an estate agent or property negotiator to either sell your property or manage it, in the case of rentals.

An estate agent's job is really to introduce a buyer to your property, in the case of sales, who is willing to buy the property. By law, this is all that is required of an agent to be entitled to their commission. However, a good estate agent will ensure that both parties are happy with the deal and follow the sale right through to the eventual transfer of title to the new owner. Some agents want their commission as soon as an agreement is signed, or at the very latest when the purchase price has been paid.

In my experience, paying the commission on signing is foolish as the sale may still fall through, and most people don't have the money upfront without first being paid for their property. The second option which is paying the commission once the full purchase price is paid, is generally the preferred scenario for most agents. However, I feel this is ethically too soon to accept payment of the commission because the negotiators lose interest in the sale and won't check up on the transfer of title.

The best time to receive payment of commission is when title is transferred to the buyer. There is no law to enforce this, as commission is due on introduction, by law. But, a good estate agent should never be chasing their commissions, they should complete the sale to the very end, and when all parties are satisfied, then they should have their commission.

Now, there are two different types of mandates in Zimbabwe which you can give an agent. An open mandate allows more than one agent to sell your property. Whichever agent introduces the property to the buyer, that is the agent who is entitled to commission. Open mandates are quite tricky, as a non mandated agent may approach you to sell the house, and although you have not asked them to sell your property, you may think it is ok to let them. Your mandated agents can all demand commission if a non mandated agent sells your house. So a word of warning, only let those, who you have mandated, sell your property. You don't want to be paying double commissions or have to deal with quibbling agents.

The second type of mandate is a sole mandate. This means you have given one agent the mandate to sell your property. When that agent introduces the buyer, they are entitled to commission. When you decide to pay the commission as discussed above, is an issue you need to negotiate with your agent.

There is a big difference between a sole agency and sole selling rights. Sole selling rights are not very common in Zimbabwe. Sole selling rights entitles the agent to be the only person allowed to sell the property. This will also prevent the owner from selling the property himself. Basically, an agent with sole selling rights will be entitled to commission when the property is sold, regardless of whether that agent introduced the buyer. My advice is to avoid this type of mandate completely.

According to the estate agents' governing bodies the recommended commission structure is 5% plus 15% VAT on sales. 15% plus 15% VAT on residential rentals and 10% plus 15% VAT on Commercial and Industrial rentals.

You may charge 3% plus VAT on sales but nothing lower. You may charge as high a commission as you like, say 7,5%, but you must have a written acknowledgement from the seller stating they are aware that they are being charged above the recommended scale of fees.

Commission is costly, so make sure you have chosen a reputable agent who will put your interests above their own. Don't be bullied into paying commission early, but on the flip side, remember you are obliged to pay commission if your agent has introduced a buyer. If both sides are honourable, the business transactions will go smoothly.

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