Beware of double commission when you sell your house
Like lawyer’s fees, estate agent’s commission is one of those grudge expenses. If you have a chat around a braai or over a drink with someone who has recently sold their house, I guarantee you that they are going to moan about how much estate agent’s commission they paid and that the estate agent did no work for it. And I can also guarantee you that the person who bought that house will, at the same time, be moaning about how much the lawyer’s costs were for the transfer and that the lawyer did no work. It was all done by the secretary!
As a property lawyer, I deal with estate agents on a daily basis and I know how much effort and work goes into selling a house and doing the admin after the sale. Yes, I know that there are estate agents who go to sleep after the deal is signed, but they are the minority. I also know how much work and responsibility is involved in the transfer process – and yes, by the lawyer as well, not just the secretary! It might seem a lot of money to a lay person, but in my (admittedly not entirely unbiased) opinion, it is money that is hard-earned.
Of course, you must pity the seller who has to pay commission TWICE on the same sale, or who has to pay commission when he didn’t think he would have to – and that after he has adjusted his price downward accordingly. And it is easier to find yourself in this position than you might think.
In the case of Wakefields Real Estate v Attree, Mr and Mrs Attree found themselves in that position.
They had a property in Durban and then bought a stand in an estate, where they started building a house. A number of estate agents, including Wakefields, offered to sell their old house. The Attrees weren’t sure whether they wanted to sell, but told the various estate agents that they could bring prospective buyers.
Wakefields took a prospective buyer to look at the house. The prospect loved the house, but it was out of her price range. In fact, when Wakefield’s agent followed up with her, she said that she had decided not to buy at all.
A short while later, the same prospective buyer bumped into another agent, employed by Pam Golding Properties. She told this agent about the house she had seen and how much she had liked, but lamented the fact that she could not afford it.
In the meantime, the Attrees had decided to reduce their price. They phoned a few estate agents, including the Pam Golding agent, and told them. The Pam Golding agent recalled her conversation with the prospective buyer, called her and put a deal together.
When Wakefields found out that the buyer that they had originally shown the property had bought it, they claimed commission from the seller.
Under these circumstances, you would think that Wakefields had no chance and that because Pam Golding Properties had successfully negotiated a deal, they were the only estate agency entitled to commission.
Not so, said the Supreme Court of Appeal. It found that the agency who had first introduced the buyer to the property was the effective cause of the sale, even if it had not successfully negotiated a deal. The reasoning is that if a prospective buyer was never introduced to a property, no sale could ever happen.
So, in this case, the Attrees had to pay commission to both Pam Golding Properties and Wakefields. They were quite unfortunate, as they did not act in bad faith, as in the case where a buyer and seller deliberately collude to circumvent an estate agent who introduced them. In this case, the Attrees accepted an offer presented by Pam Golding without a thought as to where the buyer may have come from.
It is an easy, but costly, mistake to make.
So, if you are selling your house, it is not a bad idea to put a clause in the contract where the buyer warrants that he or she was introduced to the property by the estate agent who has presented you the offer. That puts the onus on the buyer to make sure that he or she submits an offer through the right estate agent and could save you a great deal of money.