High cost of agency and legal fees are a big threat to the real estate market in Enugu.
What is the cause of this problem? We all know its consequences and share the same sentiments towards it. These questions often arises from prospective tenants, "why should I pay such a high agency fee?" Its not like the agent owns the house. Or you hear, "why doesn't the landlord pay his lawyer, why should I bare the cost of legal fees? Why do these professionals deserve such high rewards?
Even though there's a general rule of thumb for setting the professional fees, which usually states that professionals should charge 10% of rent as agency fee while 5% of rent as legal fees, you still find professionals in Enugu setting fees higher than what is recommended by the rule of thumb even though states like Lagos and Abuja mostly adhere to these rules.
In our quest to find a way to solve this problem, we approached industry professionals and legislators to pitch in their point of view in order to help us understand the motives behind such high rates. The responses we got were quite revealing.
THE LEGISLATORS:
Some legislators in Enugu(whose name I won't mention) are against enacting a law similar to the Lagos tenancy law that sets a price ceiling on rent and places restrictions on the conditions for paying agency and legals fees.
For example, in Lagos, it is illegal to compel a prospective tenant to pay 2yrs rent in advance while the landlords have the responsibility of paying their lawyers but in Enugu, it isn't so.
Most of the landlords in Enugu are politician and perceive such a law as a threat to their return on investment. So it didn't come to us as surprise when most of the legislators refused to enact such a law in Enugu. One time, one of the legislators we approached to aid in sponsoring this bill said and I quote "Oga, na now wey I don get money to build house wey una won make we dey collect only one year rent in advance?".
THE LAWYERS:
We approached the lawyers to see if we can convince them to charge lower fees but they refused arguing that they weren't under any obligation to charge only 5% of rent as legal fees stating that professional fees are set at the discretion of the said professional which is totally legal.
THE AGENT:
We approached agent to see if they would charge less. The response we got was mixed.
As an experienced realtor, I must say that there are several factors that affect the price of this professional fee. A better understanding of these factors can help prospective tenants to get a good bargain. The motives of the real estate agents are quite easy to understand, we are motivated by our commissions. The higher the fee the higher the share you receive.
The first factor that affects the agency fee is the property in question. if an agent is representing a property with a low rental price(for example, a one room self con) they are less likely to charge 10% of rent as agency fee because they perceive the commission as too small.
The second factor to consider is the listing agreement that the agent has with the landlord. (Click on the link to read up on types of listing agreement) http://www.fedennihomes.blogspot.de/2014/10/types-of-listing-agreements.html
Listing agreements are contracts between an agent and a landlord which covers the agents effort to find prospective tenants/buyers for the landlords property. These contracts contain items such as price, term of renting/sales and specific responsibilities of the agent.
The final factor that affects the price of the agency fee is the fact that the business is a kind of pyramid scheme which is why you find a chain of agents with their hand out to collect their cut of the commission in the event a deal is successful. Therefore the number of agents in the pyramid determines how high the fee will be. For example, if there are 6 agents in the scheme of things, the fee will most likely be high in order to accommodate the needs of all 6 agents.
So, if you want to pay the least amount humanly possible on agency and legal fees then follow the steps below.
STEP 1:
Find out what type of listing agreement the agent has with the landlord. If the agent has an open listing agreement then chances are that the professional fees will be high because they will be many agents involved.
But if the agent has an exclusive agency agreement then most likely, the professional fees will follow the rule of thumb plus there will be fewer agents involved. The way to identify agents that have these types of agreements are simple. Their banners will be at the gate or in front of the properties being advertised for rent/sale.
Step 2:
Everything is negotiable. Always negotiate. Insist on meeting with whoever is in charge to negotiate for a better bargain. Be it the landlord or the agency that has the power of attorney to rent out or sell the property.
In conclusion, everybody hunts for bargains as it is a fundamental human right. I recommend you go for properties that the agency representing it has put its banners in front of the property because they will offer you more favorable terms. If you aren't fortunate to find any property like that then always remember to negotiate every item thoroughly.
If you are in need of a property to rent or buy in Enugu, please click on the rent below and fill out our make a request form for FREE
http://form.myjotform.com/form/42683270025551
Sent from my BlackBerry wireless device from MTN
No comments:
Post a Comment