Estate agent commission — what’s normal, and what’s actually negotiable

There is no legal commission rate

The first thing worth knowing is that nobody sets estate agent commission in South Africa. There is no statutory rate, no regulated minimum and no industry-mandated figure. Any agent who tells you their rate is fixed by law or by the Property Practitioners Regulatory Authority is wrong.

What exists instead is a market convention. Across the country most residential commission lands between 4% and 7.5% of the sale price. In the northern suburbs of Cape Town, 5% plus VAT is the number you will hear most often, and 6% to 7% is common where an agent is carrying a heavier marketing load or working a harder-to-sell property.

Commission is quoted excluding VAT and charged including it

This catches almost everyone. Agents quote the percentage excluding VAT, but the invoice arrives with 15% VAT added on top. A "5% commission" is really 5.75% of your sale price once VAT is in.

The gap between 5% and 7% on a R2 500 000 home is R57 500. That is worth a conversation, but it is not worth choosing an agent on price alone — see the last section.

When does commission actually become payable?

Commission is earned when the agent introduces a willing and able buyer and a valid sale is concluded. In practice it is paid out of the proceeds by the transferring attorney on registration of transfer, not by you writing a cheque.

That matters for two reasons. You never pay commission out of pocket, and you never pay it if the property does not sell. It also means that if a sale collapses after signature but before transfer, the question of whether commission is owed depends on why it collapsed — which is exactly the kind of thing to read carefully in the mandate before you sign.

What the commission is actually paying for

A commission conversation goes better when both sides are specific. Before negotiating, ask what is included:

• Professional photography, and whether that includes drone or twilight shots
• Portal listings — which portals, for how long, and whether it includes any premium placement
• Whether the property is shown by the agent personally or handed to a junior
• Show days: how many, and how they are marketed
• The buyer database the agent will market to before the property goes public
• Feedback: how often, and in what form

An agent charging 5% who does all of the above is better value than one charging 4% who lists it on a portal and waits.

How to negotiate commission without hurting your sale

Negotiating commission is entirely reasonable. Doing it badly is expensive.

1. Negotiate before you sign the mandate, not after. Once the mandate is signed the rate is contractual.
2. Ask for a sliding scale rather than a flat cut. A lower base rate with a higher rate above a target price aligns the agent with getting you more, not less.
3. Trade term for rate. A longer sole mandate is worth something to an agent, and can buy you half a percent.
4. Get the agreed rate written into the mandate document itself. A verbal agreement on commission is worth very little later.
5. Do not choose purely on rate. The difference between a good sale and a mediocre one on a R2.5m home is usually R100 000 to R200 000 in price — far more than any commission saving.

Commission reduces your capital gains tax

A small consolation. Because commission is a cost of disposal, it comes off your proceeds before capital gains tax is calculated. If you are liable for CGT, roughly 18% of the commission you pay comes back to you as tax you do not owe. It does not make commission cheap, but it does mean the true net cost is lower than the invoice.