For several months, the Property Practitioners Regulatory Authority (PPRA) has warned estate agents engaging in undesirable business practices that they are in contravention of section 63 and regulation 35, read with section 62 of the Property Practitioners Act (PPA).
Section 63(1) of the PPA states that arrangements in which a Home Owners Association, for example, receives money or another form of reward for providing an advantage to one agent over the other or excluding another agent is an undesirable business practice.
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While several agents were reported, the PPRA’s investigation and enforcement department seemed to drag its heels in conducting actual investigations, leading many to assume the threat was empty.
That’s changing as the first volley of inspections was conducted at estate agencies marketing properties at an estate in Pretoria, with several agents receiving compliance notices and R5 000 fines.
“This undesirable practice is not only anti-competitive but untransformative, which is misaligned with the objectives and aims of our legislative mandate. We urge agents to stop participating in these practices, and for those who don’t, we will expand the scope of these investigations in the new year”, said PPRA acting CEO Thato Ramaili.
What can the PPRA do?
In the notice, the authority states that failure to cease these undesirable business practices constitutes a breach of the code of conduct applicable to property practitioners, which failure shall constitute sanctionable conduct as contemplated under section 62(1)(e).
Impose a fine
The PPRA adjudicators have powers bestowed on them as per section 30(7) of the Act to impose a fine or any order under the circumstances. The penalty in this case is R5 000 payable to the authority.
Revoke your FFC
Further note that the PPRA has, in terms of section 62(3) of the Act, the authority to withdraw your Fidelity Fund Certificate, impose a fine as determined by section 29(1)(a) of the Magistrate’s Court Act, 32 of 1944 and a reprimand after following a due process as outlined in sections 3 and 5 of the Promotion of Administrative Justice Act, 3 of 2000.
Name and shame
The PPRA is required by section 62(3)(c) of the Act to publish your name and transgressions on its website if you are found guilty of the sanctionable conduct as prescribed by section 62 of the Act.
“While a R5 000 fine might not seem much to certain agents, and they may not care whether their transgression is published on the PPRA website, what should be of serious concern is the fact that the PPRA adjudicators may well withdraw an agent’s FFC,” said Jan le Roux, the CE of Real Estate Business Owners of South Africa (Rebosa).
Prosecute HOAs
In instances where HOAs act as property practitioners, they also have to register as such and could be prosecuted for participation in undesirable practices in terms of the regulations.
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The decision of when to hold onto a property and when to part ways with it is far more nuanced than many might except. The ability to discern the optimal moment can significantly impact not only a homeowner’s bottom line, but also the owners’ lifestyle.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, “the decision to hold onto a property or to sell it involves a delicate balance of financial analysis, market trends, personal circumstances, and risk assessment.”
Just like with any other financial investment, the adage of “buy low, sell high” applies. However, timing the market is no easy feat. “Ideally, homeowners will want to sell in a seller’s market where there is an abundance of qualified buyers – like in 2020-2021 when interest rates were at record lows. When demand outstrips supply, property prices increase which means that a seller has a better chance of selling the home at a higher price,” he explains.
But, Goslett also warns that even if you do manage to time the market correctly, “you need to keep in mind that if it is your primary residence you’re selling, then you will also have to purchase a new home within the same market, which will possibly offset any financial gains of selling in a seller’s market,” he clarifies.
Not only is it incredibly tricky to time the property market, but it can also be inconvenient and even imprudent depending on a homeowner’s personal circumstances. Goslett uses the example of a homeowner who is no longer able to keep up with the repayments on their home loan. “The longer you hold onto a property you can no longer afford, the worse the ramifications will be. The earlier you sell, the better your chances are to recover financially and to avoid blacklisting and tarnishing your credit score,” he notes.
When weighing up the decision on whether to hold or to sell, Goslett adds that any property purchase needs to be viewed as a long-term investment. “Profit on a property purchase does not happen overnight unless you are planning on flipping the home. To allow the property enough opportunity to appreciate in value, homeowners should plan to hold onto the home for roughly around five to ten years.”
“While some properties may benefit from long-term ownership, accruing value over time, others may demand a more timely exit strategy to mitigate potential losses. In either scenario, the ability to discern the optimal moment to hold or sell can significantly impact an investor’s bottom line,” says Goslett.
“My advice to those who are uncertain is to reach out to a local RE/MAX agent to get some free guidance. They can inform you on current market trends in your given suburb and can inform you of your home’s current market value – both of which will allow you to make a more informed decision either way,” he concludes.
Writer: Kayla Ferguson
Despite tech advances, traditional estate agents still conclude the majority of property sales and achieve, on average, the highest prices for property sellers. According to the Seeff Property Group, this is a key reason why low commission agencies have failed, and sellers continue using traditional estate agents.
Any seller’s objective is always to achieve maximum profit or the highest possible price for their property. When the market becomes more challenging due to harder selling or stock shortages, agents may offer lower commissions to secure the selling mandates.
James Lewis, a licensee for Seeff Southern Suburbs, Hout Bay, and Llandudno, says that in these areas, over 70% of all sales are concluded by traditional rather than low-cut commission agencies.
There is no fixed commission structure, with 5% plus VAT as an industry average, depending on the area. Certain areas achieve 7% plus VAT, depending on how difficult it may be to sell the property. Regard is also given to the marketing and operational costs as well as the needs of the agent to earn an income, which often means that lower-priced properties tend to attract a higher commission percentage.
Lewis says the reality is that desperate agents looking for mandates (properties to sell) are cutting their commission as low as 1.5% to 3% plus VAT. This is not sustainable for running a successful real estate office and keeping up to date with all the legislative requirements governed by the Property Practitioners Act, as well as the FIC, Consumer Protection, Sectional Title, and Rental Housing Acts, to name a few.
What is more, rather than netting more out of the sale, the seller could be left out of pocket as the cut commission real estate agent is ready to move on and not stay the course with further negotiations.
Two recent sales by Seeff’s Bergvliet agent, Sharyn Dabbs, who has operated successfully in the area for 20 years, illustrate this. The first is a property in Balmoral Road which was listed at R6.495 million. After three weeks on the market, it attracted two offers. The accepted offer initially came in at R5.9 million, but after guidance and negotiation, the final selling price was R6.35 million, some R450,000 higher than the initial offer.
The second property, located in Fountain Road, was listed at R5.495 million. Within one week of listing, it attracted two offers. The accepted offer initially came in at R5.25 million. After guidance and much negotiation, the final selling price was R5.5 million, some R250,000 higher than the initial offer, and R5,000 more than the asking price.
These sales not only achieved a higher price for the sellers but were also concluded in less than half the time compared to the market average of around 6-9 weeks based on Propstats sales data.
Lewis says selling a property involves much more than just listing it on a property portal. It requires significant marketing and promotional activities, from showcasing it for the best results to syndicating and networking as widely as possible.
The agent also qualifies the buyers to ensure there are no time wasters and handles the entire sale process from start to end. Importantly, the agent is a skilled negotiator who will facilitate the best outcome, as illustrated by these two sales, in which the sellers netted R250,000 to R450,000 more than the initial offer.
The reality is that the less you pay, the less can be spent on marketing your property. Sellers want the highest price possible. Paying a low-cut commission rate could very well be a false economy for the seller. A credible agent with many years of experience selling in a particular area, like Sharyn Dabbs of Bergvliet, will not cut corners just to earn a commission. They have a reputation to uphold and will not just push a sale at any cost because that can have a detrimental effect on future business for them, concludes Lewis.
Writer: Gina Meintjes