For sellers

Agency Commission Explained

No one likes to pay estate agents, especially when their fees seem so unreasonable in a depressed market when everyone has already lost out on so much. After all, they are only showing people your property and eventually one of them will buy it won’t they? It seems like 3,500 Euros as the agent’s cut is an outrageous amount doesn’t it? The reality is that like any business, job or employment, even the slippery estate agents need to cover their costs to market your property and get paid for their time if they are successful.

This brief article better explains the costs and commitments behinds the commission fees you are likely to encounter when selling a property in Bulgaria, who gets paid what and the agent's role backstage in finding you a buyer. Unlike previous years when the good times rolled, most genuine agencies are now struggling (excluding the scammers selling advertising space and not properties) and it is really only the most efficient and strategic firms who can survive. As such if you find the commission being asked of you is too high, too much or just greedy, please read on.

1.Never pay for advertising

First and foremost, never pay any ‘agency’ for advertising or marketing your property, these so called companies are selling ad space only and not properties. Most have no ability to sell your property, no access to buyers and no people on the ground to make a deal go through to exchange. If they do have this infrastructure and still want to charge you it is because you are asking for too much for your property the agent knows it can’t be sold and thus has no chance of making anything from dealing with you.  To make it worth their while to process you, they sell you advertising space at the asking price you desire, naturally this doesn’t improve your chances of selling as no one will pay £11 for a £10 note regardless of how much you advertise its availability. In short it is a con, but it is one that 100’s are buying into every week. Any agent should be paid once they have done their job, paying in advance of action is like encouraging the donkey out the stable once it has eaten the carrot.

2. Only pay a pre-agreed commission upon successful sale

Any vendor seeking a buyer should agree to pay an agency commission upon the success sale of a property, no sale means no fee thus no risk for you if the agent fails to find a buyer, is lazy or simply no good at their job. This way you pay only when you get the result you want, plus the agent remains financially motivated to sell from the start, otherwise they have no chance to fill their pockets.

The commission you pay is the carrot on the end of the stick, in this market the carrot has to be bigger than your neighbour’s because you are competing with 10,000 other owners all trying to sell too. It sounds odd, but actually the role of the agent is not to find you specifically a buyer, it is to find buyers generally and direct them to the best match in their portfolio, if that happens to be the property you own then bingo. Naturally, any agent will steer a buyer towards a property that will benefit them and away from any offering meagre commissions or a sales that make them a return insufficient to cover their advertising costs in finding that buyer in the first place.

3. So finding buyers is the only important thing, how is that best achieved?

The simple answer is ‘advertising money’, plenty of it. The most successful agents have a combination of marketing expertise, networks / databases and very deep pockets to fund huge marketing campaigns to get buyers interested to buy through them. If your agent is without cash reserves the chances are your property will only get seen by you and him but no one else. Google, Yandex, Yahoo etc are currently the most effective marketing routes and all require a small fortune to run successful advertising campaigns. If you haven’t dealt with these giant companies you might be surprised to learn that sponsored links on their pages (which host your property) can cost up to 5 Euros to the agent every time they are clicked. Imagine that you need at least 200 people to click on your advert before you find a buyer and very quickly you can see how the commission you pay is actually more profit for Google rather than for your agent.

4. Where does my commission go and isn’t it all profit?

It has become very expensive to sell Bulgarian property these days; you need a company with English, Bulgarian and Russian capabilities which results in three times as many people, three times the overheads and salaries along the ‘route to sale’. If it is not viable, no agency will do it and no properties will get sold – Bansko resales and rentals are case study examples of what happens when there isn’t sufficient business; agents halt marketing, the region becomes static, prices fall too low for anyone to make a margin and thus the market ceases entirely.

5. Time taken to accept the realistic market price is the biggest delay in finding a buyer

Some vendors have been trying to sell for a year or more, some have dropped the price by more than half and still don’t have a buyer. The process of accepting the current market conditions and real market prices is quicker for some owners than others; you can save time and find a buyer quicker by coming to terms with the current values sooner rather than later. Very few people can hope to profit in any holiday property market now or in the near future, the lucky ones will breakeven and the majority will have to accept a loss. If you are holding out to get back what you invested and your agent has presented you with cheaper better properties than yours, you should accept that you are highly unlikely to sell. This will be in part because your agent won’t see the value in pushing your particular property (it will cost him to do so), but mostly because any buyer will quickly see they have the world of choice for small budgets and better deals are plentiful. It truly is a buyer’s market with at least 100+ properties available for every 1x buyer, you need to be sure you are in that 1% of successful sellers by agreeing a fair and appropriate commission, giving your agents the tools to do his job and accepting the real price of the current market.

If not, keep hold of it for 5 years or so, at the moment there is a huge supply from ownwrs looking to sell and comparatively minimal demand looking to buy.

6. The commission you never knew you paid when you purchased

When you purchased your property the developer or owner would have paid your agent or introducer a commission. If it was anytime between 2004-2008 this would have been approximately 10-15%. Although you might not have been aware of it the property value was only ever  85-90% of the price you paid, the rest went to the agency. By comparison, commissions today for resells are notably less, this is mostly because private individuals would not agree to pay these rates whereas developers would. However, there is a nominal minimum that commission haa to be in order to be a worthwhile undertaking for any business, below which it is not viable for an agent to act for you. For Example: if your property is worth 15,000 Euros it is simply not possible to carry out the transaction for a 3-4% commission (450-600 Euros) as the workload, time, fuel, paperwork, cost of documents and translations are actually the same as a 100,000 Euro sale. This is why we fix our commission at 3,500 Euros for the vast majority of sales (please check with us as there are variations).