A sponsored article on the Times of Malta, (understandably) blaming real estate agencies for charging outrageous commission, has unleashed a number of comments, both for and against.
As a buyers’ agency that does not follow the usual fixed commission workbook, we are tempted to grab a bucket of popcorn and watch the “cheap” list-it-yourself websites and the “expensive” agencies fight it out. However, the debate about commission is just a distraction from the one key question: “What I am getting for my money?”.
Are agents actually looking after the buyers?
We thought an agent’s comment to the article was particularly interesting:
How about we stop putting the blame on agency fees, and aiming it where it is due…greedy owners who DO NOT take advice from agents, architects etc, and over-inflate their property prices […]
[…] Unfortunately, people are blinded by $$$ and we often have to add our fees on top, because nobody works for free…obviously. […]An agent’s comment to the sponsored article in the Times of Malta
All right: here is how an “over-inflated” price is born. Ms. Owner wants to sell her one-bedroom in Xlendi for EUR 200,000 (that is to say, way too much). Mr. Agent will list it for EUR 212,000 (assuming the usual “big agency” commission of 5% plus VAT). If a Mr. Buyer shows up to sell the apartment to, Mr. Agent will flog it.
We do sympathise with the reasoning of the agent above. Many Maltese sellers would rather be millionaires in their heads than actually sell their property. However, what is an agent going to do after meeting with a “greedy owner”? They’ll list the property anyway at the price the owner wants “plus fees on top”. What happens if you’re the poor sucker that will be suckered into paying the “greedy price” plus “fees on top”? Seller and agent will both breathe a sigh of relief and take your money. Cry me a river, agent.
What is your agent doing for her commission?
The sponsored article in the Times of Malta mentions that 1.5% commission is charged in the UK, “a booming property market” (this statement is at odds with reality, but never mind). To wholesale compare commission between Malta and the UK is meaningless. As people who have sold a lot of property in London (and at 1%, not 1.5%), we can say that transactions in the UK are infinitely quicker and more transparent, and nothing like the maze of heirs and paperwork in Malta. You pay less for less work. Simple.
Why are we even having a debate around agency commissions? Is anyone arguing that architects or notaries should be paid less? No one who gets good service has a problem paying for it. That is the crux of the problem: buyers don’t feel they get the service they pay 6%, 4% or even 2% commission for. Agents are seen as a nuisance, and buyers will drive around for hours to find the owner themselves, if they can.
Ask yourself the question: what does your agent do for the commission you pay? You can expect to be driven around, have your hand shaken, and Mr. Agent will cross his fingers that you like some of the property that’s on his books. Because he will show you nothing else.
There are plenty of reputable agents that try to mediate between the seller they represent and the client’s needs. However, we find it easier to leave out that conflict of interest. We follow a simple mandate: we get the client what they want, at the best possible price.
Lower broker commission won’t bring the people “cheaper property”
The idea that cheaper property will be brought to the world by way of lower commission or list-it-yourself websites is laughable. Maltese real estate prices have increased every single year since 2000. In this period, they have risen the most than in any EU country bar Sweden. If anything will make prices come back to the ground, lower agency commission ain’t it. The apartment in Xlendi we’ve talked about before is no less a lemon for 200,000 than for 212,000. If Mr. Owner lists it himself, well, it is still a bad deal, and one that for sure we will not be proposing to our clients.
How we made a client happy, for free (and still got paid)
Let’s give you one example: this week we found an investment property for a client direct from owner, at a great price. Our work included:
- Sourcing the property
- Checking with our architect if the client could do with the property as she intended
- The seller had no floor plans, so we had plans drawn and sent them to the client
- Negotiated a significant discount with the seller (which comfortably covered our commission, so effectively the buyer paid nothing for our services)
- Negotiated a series of concessions from the seller, including sale subject to planning, 12-month promise of sale etc.
- Calculated the potential return for the client (if everything goes according to plan, the client will double her money)
Don’t think we’re cocky if we say this: few brokers, if any, will look after a buyer to this extent. And no “list it yourself” website will ever replace service such as this. The fight about the 2%, 3.5% and 6% commission? We’ll go back to our popcorn and watch it from a distance.