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In a previous article, we referred to sales commissions required by real estate agents and others who are now riding the golden bandwagon for mainly foreign sales. In addition to the Chinese 20% top-up commission, there are other professions that are putting their foot in the door.
Registered estate agents are governed by the estate agents law which provides duties and responsibilities and for the purpose, they are required to have a professional indemnity insurance in order to cover some of their and their client’s damages, basic knowledge and correct behaviour
· The law stipulates that those who wish to register as an estate agent must have some basic academic and experience requirements. This, to an extent, protects the public. This is quite correct and since the introduction of the law this profession has been upgraded, be it to an extent, with some way to go in order to reach good standards.
· Regulating any job is not bad and in Cyprus especially we regulate just about everything from hairdressers to barbers, taxi drivers and of course all the other professions such as legal/accounting etc.
· Because the real estate market is improving, be it slightly, and because of the expected forced sales/administrations, a number of other professions have started to get involved in real estate sales and as if this is not bad enough, some of them are using their own personal contacts in order to more or less bypass the estate agents law. We have also one MP in particular who seems to have undertaken some sort of a crusade to abolish the law and leave this profession to a free-for-all.
· The law in Cyprus has improved things to a degree but the market needs more restrictions and consumer protection where local attitudes do not help. The subject of exclusivity be it for a period of time, is not common and it is more acceptable to the foreign rather than the local market. There are arguments for and against having an exclusive estate agent which one must consider, but for a short period of time, maximum 6 months, it is recommended.
It is not very often but it happens that the seller (who is responsible for the commission payment) attempts to by-pass the agent having a direct deal with the buyer (introduced by the agent). If a house sells for example at €300,000 and the commission is 5% + VAT this is approximately €17,850 – So if a discount is made of approximately €8,000 by the seller, both seller and buyer stand to win – with the agent being left in the cold and by the time the agent finds out the seller disappears or with both in collaboration (seller/buyer) they can come up with all sorts of excuses (if the situation ends up in court).
· Placing a ‘For Sale’ board on a property is the most effective way to sell a property but you will soon realize that if not stolen, other agents and neighbours will remove the sign, others will use it for target practice, whereas we found on three occasions that our own signs were repainted and with other logos placed on top!!
· The claims that an estate agent has cannot be easily won in court. For one reason or another the courts do not have a sympathetic ear for the agent and even in cases that the agent wins, the court may decide to compensate the agent on a time and effort basis instead of commission lost. In most cases, the compensation in terms of a time and cost basis amounts to approximately 10% of the commission.
· In a recent case we came to note we placed a memo on the property and now everybody is blocked, the seller with not be able to collect the whole amount, the buyer cannot have the property transferred and the agent instead of getting a commission he is out of pocket with legal fees.
· Promoters cost and advertising expenses – is the new name of the game. Some illegal estate agents, accountants, even lawyers duly issue commission bills but are named as consulting fees. The tax authorities, the responsible body to accept or not that the expenses are within the law, do not particularly bother as long as the payment has a recipient.
So, in the end, those who are real estate agents have to confront all kinds of restrictions with competition from all directions. We discovered a really provocative “commission” paid to a taxi driver, by charging the owner for taxi expenses during the stay in Cyprus of the foreign seller €3,000 – not tax deductible for capital gains but it shows the scheming and to what extent people will go with all sorts of tricks. So what sort of a job is this at the end?
