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Nedbank - Property Talk

Buying a home is one of crucial the investment decisions that people often have to grapple with.

But most prospective homebuyers are not familiar with the do's and don'ts of buying a house. To navigate the complex maze of home buying, the uninitiated often enlist the services of an estate agent.

However, calling on the expertise of an agent can have its problems. Critics charge that estate agents have a conflict of interest in property transactions. An estate agent cannot represent a buyer and a seller in the same transaction, it's a conflict of interest, charges Allister Long, MD of Powerhouse Financial Services.

According to Long, how do you get the best price for the seller and the best price for the buyer? “We believe that there is room for independent representation of both parties,” he contends.

Long also argues that in a lot of countries in the world, you have an estate agent representing the buyer, and another agent representing the seller, resulting in the commission being split.

Wayne Thornburn, a commissioner for Texas Appraisser Licensing and Certification Board in the USA, confirms that in some states of that country, the dual agency model is applied.

“You have one agent representing the seller and the buyer being represented by a separate agent,” said Thorburn, adding that the commission is then split between the two agents. He explained that in such an arrangement, the selling agent usually earns 4% and the buying agent pockets 2% of the commission.

“The way property has been transacted in South Africa for the last however long, the estate agents generally do control the market,” says Long. “And we believe that there is a need in the market for independent representation for the buyer.”

Justin Clark, MD of Private Property, advises that the most important thing you need to ask yourself before deciding to contract an estate agent is: “Who is looking after your interests.” In South Africa, argues Clark, there is only one agent looking after both the buyer and the seller.

“The estate agent earns commission as a result of negotiating a successful sale, so the only incentive is to close the deal only. Out of the three parties, whose interest do you think is foremost in the mind of the estate agent?" asks Clark.

In local property transactions, contends Long, the buyer often gets a raw deal. He reckons that this should be something the watchdog body, the Estate Agency Affairs Board (EAAB) should be looking at.

In response, Linda Nyembe, the chairman of EAAB, says the board is currently looking at the issue and an announcement would be made regarding this “contentious issue.”

But Nyembe also hastens to add that the code of conduct of estate agents requires that agents “should not represent the seller at the buyer’s expense.” But Melanie David, a conveyancing attorney at Powerhouse Financial Services, counters that often agents disregard the code of conduct because the board is not doing enough to enforce it. “Agents don’t comply with the code of conduct because errant agents are not adequately punished by the board.” (Moneyweb)