Why Property Brokers are not paid their dues?

Why should i pay you 2%? Why should i pay you 3 %? or Why should i pay you even 1%? You do not deserve this kind of money. These are questions and statement asked or done by customers to the property brokers involved in the deal. The brokers has a patent answer viz; we did got you the deal, right?; we did all the running around for you, we also got you the right price, it is the fees for our services and many more such justifications.

The brokers also feel there is no one to address this issue for them at the regulatory level & the government gives 'step motherly' treatment to them. We are always the soft target or the liability of the deal and last to be paid. Even RERA does not have regulation to sort out this issue; but against us! Where do we go?

So 'who is right and how do we resolve this?' It is the million dollar question.

Both the perspective - 

Prospects' (Customers) perspective:

We would have got much lesser price (buyers) or higher price (sellers) in the deal but the property agent did not take any efforts. We are paying him more than his dues. Is the fees even worth the work / service he has given. In market everybody pays them this much, so why should i pay him more. The brokers could have told me about the legal aspects / dues or issues regarding the property; i have paid more than expected for the deal. He was not transparent and was eager to finish the deal instead of guiding us. He was more interested in his brokerage than my needs.

Realtors' perspective:

I did all the running around to get him the right property and the right price. I went out of the way to serve him and closed the deal. It is the thankless job we do here, nobody recognizes our effort. We are always in the stress? If for some reason the deal fails, we do not get paid for the effort. If the deal is thro', our fees gets cut in all possible way imagined. How should i get paid for my dues?

Services & Fees

Fees are not define in real estate sector because the services are not defined. So let us define the services along with the fees structure. This may be disagreeable to some but we are approaching long standing unorganized sector in India and we have to begin somewhere with inputs gathered from all developed countries, sector and customized accordingly.

Example is INR 1 cr property deal:

• Property referrer /lead generator & fees: This person could be a relative, friend, biz acquaintance or somebody not from the real estate sector. The person referring may be paid (or not depending on the referrer) by the realtor benefited. Giving or generating a lead to the right seller / buyer may be paid nominal / reference fees, i.e; around 0.05 to 0.1 % of the deal = INR 5,000 - 10,000.

• Property agent & fees: This person is more than a reference but with less knowledge of the real estate sector. He has the role of convincing the prospect of getting to the final broker / consultant or opposite party. He is not involve with any of the transaction part but with the footwork and showing around with the prospect. This agent may be paid around 0.375 %(< 0.25 to 0.5 >) of the deal = INR 37,500. He has to be paid by the final broker / consultant or the prospect depending on the deal.

• Property Broker & fees: The broker involved is the person responsible for closing the deal for prospect and be paid by him. He decides the deal value (by negotiation process) along with the prospect by understanding the property and its legal & other relevant structure with basic services. He may be paid around 1.5 % (< 1 to 2 >) of the deal = INR 1.5 lakhs depending on the people involved.

Most of the realtors fall in these above categories viz; property agents & brokers in India. And it is here the expectations of the prospects and realtors differ with its scope of work being ambiguous & not defined. This leads to the dispute with the fees. The realtor expecting higher fees but providing lesser value / quality services & prospects expecting high quality property consultancy services (explained below) but paying lesser fees.

• Property Consultant & fees: This is the person /firm who gets the entire end to end dealing of the property from search to possession of property (for buyer) OR search of buyer to selling of the property (for seller) along with understanding of the deal in its entirety and intricacies. He would advise the prospect in all aspect of the deal like a property doctor (read consultant) with a team of relevant service providers like lawyer, architect, liaison agent and others. He would take all the responsibilities of the deal with a mandate signed from the prospect. He may be paid around 3 to 6 % (4.5 %) of the deal = INR 3 to 6 lakhs. This services are usually rendered by international property consultants IPCs.

You would see that, as the qualification of the service provider improves his remuneration increases too.

Overview: (Awesome service)

Let us take one thing at a time. Firstly, the attitude of the realtor involved is to serve the prospects /customers and not getting fees. Fees are paid after services so concentrate on your job. It is duty of the realtor to get the right property, right deal and the right price. It is his job to get the legality right for the property and explained the price/fees to rectify or get to order. The property legal status and other aspect has to be paid by the seller to be sold in the market. It is the job of the realtor to guide the customer and make him feel secure. That is the reason prospect/customer has come to you & paying for same. Realtor also knows that the brokerage fees being paid is added up in the budget of the prospect /customer. In the same way the prospect should realize that till the assurance is not given by him, the realtor would not take full length effort.

Now how does one assures of the loyalty from the customer? One doesn't. As there are others in the market with same services, so the customer has the choice of choosing any one of them & usually he chooses the cheaper one and lands with same kind services. If realtor need to be paid worth his services he need to be better than the peers or create a niche (USP) in the market. Whether the worth or value of the services is right or no is the second issue as discussed above.