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Unlikely to succeed

A clampdown by the Law Society of SA on conveyancers paying commissions to estate agents is unlikely to succeed because the practice is simply too widespread, say agents. Nevertheless it is indicative of the pressure on conveyancers and estate agents to change practices which are seen as being non-transparent and which limit consumer choice.

Smaller firms are feeling pressure on two fronts - from efficient large firms which have turned conveyancing into a business, and from the effort by buyers and sellers to push down lawyers' fees and estate agents' commissions. Yet, for some lawyers, professional ethics and the independence of the attorney are more important than freeing the market from restrictions and special interests.

Also of interest in the article - Wash the Windows - which appears in the May 20 issue of the Financial Mail is the calculation that conveyancing fees amount to a massive R7bn a year. The article continues with a discussion of how the consumer has benefited from the poor image of estate agents and the deregulation of their commission structures. It ends with the need for the Estate Agency Affairs Board to use its funds to educate consumers, conduct research and to expand market development into the townships.

Market interference
What's wrong How it affects the market How to fix it
The seller chooses the conveyancer but the buyer pays the fee Limits buyer's choice and ability to negotiate the fee The seller chooses and pays
Conveyancers can't advertise like agents, banks and originators Limits choice of sellers, who enter the market on average every seven to ten years;
Conveyancers promote business via secret agreements with agents, so market not transparent
Allow conveyancers to promote themselves
Agents have pre-printed sales agreements Gives agents the opportunity to protect their own interests above that of buyer's and seller's Have a single agreement to be used by all agents
Agents pay for advertising Agents use this for branding and pass the cost on to sellers through high commissions Seller pays for advertising and controls budget
Agents own main advertising media Gives advantage of a single shop window but restricts agents from advertising elsewhere Broaden ownership, stop restrictive shareholder agreements
Agents control some mortgage originators Limits buyer's choice of originator and possibly lender Broaden ownership, make more transparent
Agents overprice; sellers among the most pampered in the world Justifies high commissions, but allows mediocre agents to earn more than they deserve Large agents set example and reduce their service

Article on Financial Mail

Reader Comments:

Ranata Saayman 27/05/2005:

I beg to differ from the estate agents' point of view. I encourage the Law Society to keep at it and to get really tough with those attorneys that are conducting themselves in such an unethical manner. Conveyancing should be about service and not about who pays who the highest commission. By eliminating this practice, estate agents will support the most efficient Conveyancing firms. The seller and purchaser should be the ones benefitting from the whole process, not the estate agent.

Why should the estate agent, who in any event receives payment for his services, receive commission from the attorney as well? It doesn't make sense and if this practice continues, the Conveyancing Industry will become the laughing stock of the whole property market. Why you may ask? Because the most educated and professional people in the whole transaction ends up being pawns at the bottom of the food chain.

I encourage Conveyancers to stand together and to fight this encroaching black cloud which could eventually end up destroying our profession.

Jenny Dugmore 20/06/2005:

As the principal of an estate agency in Somerset West, I wholeheartedly agree with Renata Saayman. Our business is not conveyancing and we should not be paid to push our clients down a road which benefits ourselves and not necessarily the client. Our sellers are often not familiar with property sales transactions and naively follow the estate agents lead.

Besides the above, The Code of Conduct of an estate agent prohibits estates agents from persuading their clients to use a particular bank, or conveyancer. So I am completely unsure why the debate.

This is an issue for the Estate Agency Affairs Board. An agent accepting commissions from a lawyer, is clearly using his power to push clients in a direction. On the other hand, mortgage originators do not represent only one bank. Therefore, the client is not being compromised through the use of a mortgage originator. He will choose the best interest rate.

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