In tough market, some estate agents are willing to take home less than 5% just to stay in business

As houses spend as much as 20 weeks and more on the market, an increasing number of estate agents are starting to offer discounts on commissions charged for selling homes.

However, for one agent commissions of less than 5% have been the norm for the past two years.

André Le Sueur, an estate agent for Property 100 in Pretoria, said for the past two years his average commission on sales is between 2,5% and 4,5% - and he believes he has sold more properties because of these lower fees.

Some estate agents charge 7,5%, but Le Sueur doesn't see the point of charging a high commission and not being able to sell any property particularly in this current property cycle.

Even though he charges less than 5% commission, he gets sellers asking for a discount and sometimes he gives discounts of up to 1% - but it depends on the property he is selling.

Ria Bester, a rental agent at Zenith Properties in Kroonstad in the Free State, said commission for rentals is between 6% and 10%.

Jerome Khambule of Khambule Estates, Durban, said a commission of less than 5% is a huge blow to income as there are many business bills to be paid. His estate agency charges 7,5% commission fees and he says he cannot give sellers discounts of less than 5%.

Although the market is currently tough, particularly as buyers are generally required to have deposits of at least 5% of the total price, he doesn't see discounts of less than 5% as a good thing for business.

Sharing Khambule's view is Linda Erasmus, chief executive officer of Fine and Country South Africa.

When agencies start operating under the rate of 5-6% commission, they are moving into the danger zone, she suggests.

Currently with so many agencies closing, the public will have no choice but to appreciate a higher commission rate for an all-inclusive quality service, said Erasmus.

She said many agents will cut their fees to unrealistic rates just to get the business and clients will have little guarantee in such a case that funds for marketing are available.

In tough markets where buyers are scarce, agents need to get out of their familiar territories of operation and look far and wide to find a suitable buyer, she said.

When markets are stronger and more buyers float in and out of suburbs it is the perfect time for agents to cut fees - however when times are tough and the number of qualified buyers can be counted on one hand, it is time to analyse whether the cost of marketing is going to bring in a real sale, said Erasmus.

It is common in South Africa for home sellers to negotiate the estate agent's fee, however in most cases it is simply just accepting that the fee is less but the activity and marketing are the same, she said.

Estate agencies are businesses and marketing of homes needs to be paid for and commission needs to be earned.

"When agents become too desperate for business and cut commission below 3%, the activity will also be cut down to more often than not zero," added Erasmus.