Real Estate commission cap removal to address agent challenges

February 27, 2024 6:31 am

The Real Estate Licensing Board expressed optimism that the recent removal of the two percent commission cap on residential property sales below $500,000 will address challenges faced by real estate agents and improve market transparency.

The previous cap, implemented in 2022, was met with concerns from agents who found it difficult to cover operational costs, particularly for properties in remote locations requiring multiple client visits.

Real Estate Licensing Board Registrar, Peni Komainavoka says the two percent cap was criticized by some agents who argued it made taking on lower-value properties financially unviable.

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” Some of them mentioned that they were not taking listings of 2% in that category for properties below 500,000 with a 2% commission. They mentioned that it was quite a challenge for them to cover their business operating cost for properties that were located in isolated places, and they have to take customers or clients for viewing maybe two or three times, which far outweighs the commission that they will get from the 2%. “

Komainavoka says the removal of the cap is expected to increase flexibility for agents to negotiate commissions.

“As I mentioned, we have 96 real estate agents, the vendor, and the homeowner who engage the services of the real estate agent. They will have a wider variety of agents to choose from than 96. And also they will be able to negotiate not only the commission but also the conditions of engagement. The homeowner should probably look at the condition of engagement that’s going to be negotiated in their listing agreement. “

He adds that REALB will continue to monitor real estate agent activity through the implementation of the new legislation.

He is also urging both agents and sellers to engage in transparent communication and ensure fair agreements are reached.