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Real Estate Agent Commissions

Real Estate Agent Commissions

Speaking on a Friday edition of Radio Pheonix’s “Let The People Talk” programme, the Zambia Institute of Estate Agents President, Mr Logan Nyasulo gave a presentation on the importance of using a registered ZIEA agent in real estate transactions. One key question that was of note was the general public perception of agents’ commission. A number of callers into the programme expressed dissatisfaction with the perceived “high” commissions paid out to real estate agents. We thought it best to try and highlight some of the costs covered by the perceived high commission rates of registered ZIEA agents.

There are several factors at play in determining commission rates. Some of the main factors are as follows;

  1. Risk: Any agent’s “engagement” with the property owner is simply “at will”…they can be cut off at any time within the mandate terms. This is especially true with property owners that prefer to have open mandates with several agents instead of entrusting one agent at a time to get their property off the market quickly. Many property owners are unwilling to work exclusively with one agent. This increases risk for all the agents involved as marketing and advertising costs are more likely not to yield any return in such a case. As a rational agent, you have to factor in this risk as a part of the commission payment if received.
  2. Costs of doing business: Getting started as an agent isn’t so easy, especially if you are operating within the law. Keeping your business afloat is even harder as a compliant ZIEA agent. ZIEA agents need to pay for annual membership renewals in addition to maintaining a physical office with proper records of business operations. Then there’s the marketing costs; getting new business requires significant marketing spent over time – agents can spend significant monies every month to market themselves and get the next deal in their pipeline. Once a property is listed, the costs go up to properly service and market the listing for sale or rent. There’s no guarantee when it will sell or go off market or if the agent will get fired before it does.

In summary, it’s always best to negotiate a fair commission whenever possible, but do realise agents also need to keep office open without a guaranteed income regardless.

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