Avoid paying two commissions

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John Smyth, CEO of Multi Net Mortgages, has pointed out that in South African law any introduction to a property by an agent which down the line (no matter how much later) leads to its sale via another agent may be deemed by the law courts to have been an ‘effective cause’ of the sale – and this will probably mean that the seller will have to pay two commissions, both quite possibly at the originally negotiated percentage level.

Conversely, says Smyth, if an agent takes a client to a property knowing that he has already been introduced to it by another agent, he is obliged by the Estate Agency Affairs Board Code of Conduct to warn the seller that if a deal is concluded he could now be liable for two commissions.

Written consent

In these situations, says Smyth, the second agent has to obtain written consent to be involved and in most cases an agreement will be reached with the initial agent whereby the commission is split between them.

Quite often, says Smyth, the client will swop agents without revealing the first agent’s original participation in the whole process. In these cases, the client has only himself to blame if he finds himself having to pay two commissions.

In other cases the client may already have a fully trusting relationship with an agent and will insist that he be involved as an extra negotiator. Here, too, the initial agent will probably have to agree to split the commission.

“As bond originators,” says Smyth, “we are seldom informed about the seller’s relationship with his estate agent – so the situations described can creep up on us without our being able to warn those involved of the pitfalls that lie in wait for them. The lesson to be learned, however, is that total openness between the parties at all stages of the deal is essential.”