SA estate agents face winds of change Real Estate Home Keys Agent Hand Sale Handing 3337032

The home buying consumer gets the upper hand

By John Graham

Graham is executive chairman of HouseCheck and founder of the National Association of Building Inspectors of SA (NABISA)


The winds of change will blow strongly through the estate agency industry during 2019.  South African estate agents have traditionally represented sellers, not buyers, and have earned handsome commissions for facilitating the sale of  homes in our R3.8-trillion residential home market.

Now, innovative low-fee internet-based estate agents, together with the new FNB app is causing huge consternation in the ranks of the traditional high street estate agents. Low-fee agents have disrupted the market with aggressive price-cutting and late in 2018 First National Bank launched a smartphone banking app  which enables FNB clients to list and sell their home securely to buyers who qualify for a home loan on the app.

The average commission paid to South African residential sales agents ranges between R60,000 and R210,000.   “The industry standard is 7%, although the norm is usually around 5%,” says Ted Frazer, Seeff national marketing manager.

Now, the new Property Practitioners Bill (PPB), which was unanimously approved by Parliament late last year, will swing the pendulum heavily in favour of the home buyer.  Buyers will for the first time enjoy easy access to consumer protection if they believe they have been ripped off by agents or sellers.

Estate agents broker around 8,000 second hand residential sales a month with the top agents in the industry earning fabulous sums.  Because of the juicy commissions, the estate agency industry, which is dominated by a number of white family businesses, has also attracted a high number of wannabee agents.

The asset value of the property sector is massive: in 2016, the Property Sector Charter Council put the sector’s value at R5.8-trillion. Of this, the formal residential portion (homes registered at the Deeds Office) is by far the biggest, worth R3.9-trillion (6.1-million registered homes).

The PPB will probably be enacted this year – it still requires approval by the Council of Provinces before going to the President for signature.  

This new law will place new and exacting obligations on estate agents in terms of consumer protection. The establishment of the office of the Property Practitioners Ombudsman will also provide an easy and cost-free route for buyers to dispute sellers declarations and hold sellers and estate agents accountable for defects not declared upfront.

Disputes will undoubtedly delay transfers, and agents will slowly come around to the obvious solution of recommending independent inspections prior to offers being made or deeds of sale being concluded.

The PPB provides much greater protection to buyers of existing homes – something which the Consumer Protection Act failed to deal with.

Sellers of immovable property will now need to declare all defects on their property and a comprehensive defects disclosure document will form part of the sales agreement and the transfer documents. The PPB does not distinguish between latent and patent defects.

The PPB will force agents and sellers to disclose sufficient information to prospective buyers to enable buyers to make informed decisions.

No longer will disgruntled buyers be faced with expensive legal obstacles.  Instead, buyers will simply ask the PP Ombud to investigate and enforce compensation where sellers and agents have failed to fully disclose to buyers all material facts regarding the condition of the property.  The PP Ombud will have authority equivalent to a magistrate.

This radical change in the property industry will bring greater fairness to the sales of existing homes.  The role of the agent will become that of honest broker – ensuring that both seller and buyer can negotiate on the basis of informed decisions.

“Knowledge and information are not the same things,” says Schalk van der Merwe, Rawson’s franchisee.   “Information is freely available – go online and you can find advice and opinions on any property-related subject you might need. But being informed doesn’t always translate into being equipped to make sound property decisions.

“For that, you need the ability to interpret information within the context of a specific opportunity, which takes the kind of in-depth knowledge that only comes from experience.”

Agents will now be compelled to consider not only the interests of their employer who pays their commission (the seller) but also to be fair to the prospective buyer.  

To reduce delays and minimize dealing with disputes after the sale, the PPB makes it in the agent’s self-interest to ensure that the true condition of the properly is declared to the prospective buyer up front.   Only a foolhardy agent will rely on a seller’s declaration. The seller is often innocently unaware of potential problems in areas like the roof, or hot water geyser, and is usually ill-equipped to diagnose issues like cracks and damp.

The PPB will inevitably mean that South African estate agents will no longer be able to resist the international trend to recommend independent home inspections.  

In the US, for instance, 80% of existing homes are inspected by independent inspectors prior to the conclusion of the sale.  US agents routinely recommend an inspection to avoid the possibility of past-sale litigation.

In South Africa, mainly because agents fear that an inspection may reveal hidden defects and “kill the deal” less than 1% of sales of existing homes are contingent on an independent inspection.

The PPA will not only regulate estate agents but also other “property practitioners” , including home inspectors and everyone else involved in providing services in relation to a property sale.

This means that home inspectors will also need to be accredited in terms of the PPB and their reports will also be subject to review by the PP Ombud.  This will demand a higher level of competence and qualification for the South African home inspection industry.

The new national building inspector qualification, which is expected to be accredited by the South African Qualifications Authority (SAQA) later this year, is therefore opportune.The development of this qualification has been driven by the municipalities, the NHBRC and the private sector (banks and home inspection companies).

This new building inspector qualification is expected to create many new job opportunities in government (Public Works and Human Settlements), municipalities and the private sector.

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