Each country has its own regulations regarding real estate agencies. In Cyprus the Real Estate Agents Law, but when people come from abroad, they have their own country’s system in mind which, at times, creates confusion.
It is normal abroad, for an estate agent to be paid a fee to find a suitable property for an investor.
The fee may range from 1-2 per cent on the purchase price as a finder’s fee. In such cases however there must be an explicit provision in the agreement, should the parties agree, that the agent will not claim a commission from the seller in addition. In Cyprus this finder’s fee is rarely adopted. If someone wants a particular type of property, he should appoint several agents to find it and the successful agent will receive a commission from the seller (unless otherwise agreed).
The commission is the percentage agreed between the parties (or a fixed sum) and there is no limit. The agreement must be in writing otherwise the law states a 3 per cent commission on the agreed price. The commission may be payable even if the deal does not go through, unless there is a clause in the contract allowing for this.
The commission in some European countries is split 50/50 between the buyer and the seller, in others the split varies. In Cyprus the commission is paid wholly under the law by the seller (unless otherwise agreed). In Cyprus, the agent’s job is to find an able buyer. If he does and the seller refuses the deal, the estate agent might ask for a full commission or ‘expenses’. There have been several cases however decided both by the UK and Cyprus High Court, with judgments that the court might decide the full payment of a commission.
It is normal abroad for an estate agent to offer his opinion on the value of a property. In Cyprus this is also done, but an estate agent may not issue an official written valuation report as such.
It is notable that in order for an agent to get a listing they might quote a high sales price in order to secure a listing. Afterwards they won’t be able to sell it, making excuses, and this will harm the seller.
In Cyprus valuations are carried out by valuers registered with the Technical Chamber of Commerce. If they are not, do not use them. Proper valuations are more reliable than an estate agent’s opinion.
In Cyprus, especially amongst local sellers, is not ordinary to give exclusivity to an agent. Exclusivity means that even if the owner or another agent sells the property, the seller owes a commission to the exclusive agent even if he did nothing. So they might end up paying a double commission.
There are many arguments for and against exclusivity appointments. It is normal in many European countries, but if you opt for this, place a time limit on it, say of six months.
Bear in mind that if a buyer is introduced by an exclusive agent but the buyer buys the property after the expiration of the time limit, the agent might have a case against the seller subject to the agreement.
It is not uncommon to have a buyer and a seller agree to ‘cheat’ the agent to save on the commission, with the seller reducing his price accordingly. Such cases, though, may end up in court, placing a no transfer order on the property, so the buyer and seller are left in limbo in the meantime
Use a registered agent, otherwise the seller won’t be able to deduct the commission from the sales price and the non-licenced ‘agent’ might end up paying a fine or even going to prison.
If you are going to place your trust in a single agent make sure you know how they will be promoting your property and check in on them at intervals.
We also recommend agents pass on the contract of sale to a lawyer, who will check the various items (building permit, waiver of mortgages and so on).
Bear in mind that some lawyers ask for a commission as well when handling a deal of sale, either by blackmailing the agent to get a ‘cut’ or advise both sides against the deal and suggest other properties from which they can get a commission.
Another con is introducing a third party (not an agent) to a seller to claim commission based on the pretext of promotion.
If a seller is asked to pay a commission abroad, especially at an unknown bank, it is suspect. The seller may find themselves involved in money laundering.
In Cyprus, local estate agents still have a long way to go in order to upgrade their profession. A point in hand is the numerous illegal estate agents operating with full page ads in the press despite many having been officially reported and some even convicted.
Care is needed we are afraid.
Antonis Loizou & Associates EPE – Real Estate Valuers, Estate Agents & Property Consultants, www.aloizou.com.cy, [email protected]