Advice and Opinion

Traditional Estate Agencies can take nearly 20% of capital profit

Home ownership in South Africa averages eight years and sellers cashing out after this time often feel flush with their capital profit, which, after discharging their bond, leaves them with a sizeable deposit for their new home. However, there is a sleeping partner waiting to take nearly 20% of that capital profit and that is the traditional estate agent.

Using home price research figures from ABSA, the capital profit of an average medium sized home purchased in 2006 for R637 300 and sold in late 2014 for R1 194 200 would have been R556 900 for the average eight years of home ownership.

The traditional estate agency charges commission of 7.5% plus Vat, or 8.55%, and on the sale price of R1 194 200 this amounts to R102 104 paid out in commission. Out of the owner’s capital profit of R556 900 the estate agency receives R102 104, or 18.3% of the capital profit for merely selling the home.

Until recently the man in the street simply had to cough up and pay a good slice of his capital profit to the estate agency because the sale by owner model has not proven viable in South Africa. With over 40 years of experience in the property industry, Neville Berkowitz (62), a pioneer of property economics in South Africa, institutional adviser and residential property developer, believes that HomeBid has created the solution for home owners.

Recently launched HomeBid, a low commission estate agency only charges 1.95% commission to home owners wanting to sell their home The HomeBid process involves the professional services of an unbiased and independent, registered professional valuer, Internet marketing specialists, private bankers and property attorneys to conclude the sale agreement between successful bidders/buyers and sellers.

“Using the ABSA research example, the HomeBid process at 1.95% commission will only claim 4.2% of the homeowner’s capital profit compared to 18.3% claimed by traditional estate agents. HomeBid enables homeowners to bank an additional 14% of their capital profit,” says Berkowitz.

Figures and calculations in were provided by HomeBid for example purposes only. Please consult your financial advisor before making any investment decisions.