Agent’s Commission and the Purchase Price

You're preparing to sell and someone suggests listing with two or three agents for wider reach. It sounds sensible. Then, weeks later, you discover the buyer who made an offer had already viewed the property through a different agent entirely. Now two agencies believe they are owed commission, the conveyancer is waiting, and what should have been a clean registration in your Offer to Purchase is anything but. This is the point where understanding how agent commission works in South Africa becomes urgent.

What is agent's commission in relation to the purchase price?

Agent's commission in a property sale is a fee paid to the estate agent who was the effective cause of the sale, drawn directly from the purchase price once transfer is complete. The OTP must record the commission amount or percentage, whether VAT applies, and when commission becomes payable, typically on registration of transfer. When multiple agencies are involved without a sole mandate, the risk of competing commission claims arises, because more than one agent may be able to demonstrate a causal link to the sale.

Key Takeaways

• Agent's commission is drawn from the purchase price and paid by you on registration of transfer. The OTP must record the commission percentage or amount, the VAT position, and the triggering event.
• South African property law focuses on effective cause. The commission belongs to the agent whose actions directly led to the sale, not necessarily the agent who received the offer.
• When multiple agents are involved without a sole mandate, you risk competing commission claims if more than one agent can demonstrate a causal link to the same buyer.
• A sole mandate concentrates authority with one agency. Introductions are tracked, causation is unambiguous, and commission is paid once, correctly, and without dispute.
• Commission disputes most often arise from duplication: the same buyer introduced by two agents at different points. A sole mandate prevents this by establishing a single line of accountability from the first viewing.

How agent's commission is calculated in South Africa

Agent's commission is calculated as a percentage of the purchase price, agreed between the seller and the agency at the time of mandate. The Property Practitioners Act removed the fixed commission rate that previously applied, so commission is now negotiable. Most agencies operate within an industry range, but you are entitled to agree the exact percentage before the mandate is signed.

That agreed percentage, together with the VAT position and the triggering event, must be recorded in the Offer to Purchase. Commission is not charged on transfer, nor is it deducted from your proceeds by the conveyancer unless specifically recorded in the OTP. Knowing how the calculation works before you list allows you to compare agencies on a like-for-like basis and negotiate from an informed position.

Who pays agent's commission: the buyer or the seller?

Agent's commission in South African property transactions is paid by the seller, not the buyer. It is drawn from the proceeds of the sale at the point of registration of transfer and paid to the agency by the conveyancer. The buyer does not pay commission directly.

However, commission forms part of the seller's calculation when setting the asking price, so it is implicitly reflected in the price the buyer pays. As the seller, commission is one of the costs of sale your conveyancer accounts for when calculating your net proceeds. You should know the commission amount and its VAT treatment before signing the OTP so the figure is not a surprise when your statement of account arrives at transfer.

When does commission become payable?

Commission becomes payable at the event specified in the Offer to Purchase, typically the registration of transfer at the Deeds Office. Payment before that point is not standard practice. A commission clause that makes commission payable when an offer is accepted, rather than when transfer registers, creates risk for the seller: if the sale falls through because a suspensive condition is not met, you could still owe commission even though the buyer never received the property.

Review the commission trigger carefully before you sign. In the Golden Homes OTP, commission is payable on registration, which means the agency shares the risk of the sale not proceeding. That alignment of interest matters when you are choosing who to list with.

VAT on agent's commission

Agent's commission attracts VAT at the standard rate, currently 15%, where the estate agent or agency is a registered VAT vendor. The OTP must record whether the commission amount stated is inclusive or exclusive of VAT. If the commission is stated as exclusive of VAT, the effective cost to you as the seller is the commission percentage plus 15%. Where the OTP is silent on the VAT position, disputes can arise about what was agreed.

Ask the agent to confirm the VAT position in writing before you sign the mandate, and ensure the OTP reflects the correct treatment. VAT on commission is not the same as transfer duty: transfer duty is a tax on the buyer, while commission VAT is a cost of sale borne by the seller and reduces the net proceeds you receive at transfer.

Commission disputes and the Property Practitioners Act

Commission disputes in South African property sales typically arise when more than one agent claims they were the effective cause of the same sale. The Property Practitioners Act 22 of 2019 and the common law test of effective cause determine which agent is entitled to commission. Effective cause is not about who introduced the buyer first: it asks which agent's actions were the proximate, direct cause of the sale proceeding.

A buyer introduced by one agent who later made an offer through a second agent creates a genuine dispute about causation. These disputes delay registration, increase legal costs, and can result in a seller paying commission twice. The most reliable way to prevent a commission dispute is a properly structured sole mandate that records exactly which agent is authorised to introduce buyers and for what period.

Negotiating agent's commission

Agent's commission is negotiable in South Africa and has been since the introduction of the Property Practitioners Act. There is no legislated minimum or maximum. As the seller, you can negotiate the commission percentage as part of the mandate discussion before you sign. What you are negotiating is not just a percentage: you are agreeing on the marketing plan, the agent's experience in your area, the scope of their buyer database, and the level of service you will receive.

A lower commission does not always mean a better outcome. An experienced agent who commands a competitive percentage and achieves a higher sale price may net you more than a discounted agent who closes fewer transactions. Understand what the commission covers before you reduce it, and compare agencies on full-service terms before you sign.

Closing Reflection

Commission is not a number to negotiate at the end of a conversation. It shapes how your property is marketed, who can bring buyers to you, and whether the sale closes without dispute. An agent who understands the commission structure, records it correctly in the OTP, and operates under a properly structured mandate protects you from complications that arise when those things are not in order. The figure in the OTP matters less than the framework it sits within.

You shouldn't have to navigate commission obligations, mandate structures, or the risk of competing claims without understanding what the OTP must record about commission and what mandate type protects your position. With Golden Homes, you won't.

Contact Golden Homes before listing. An agent will confirm what the commission clause must contain, explain the mandate options, and ensure the OTP records the commission terms correctly before the property is marketed.