Pinnacle

Real Estate Agents: A Necessary Evil


“BROKER” the six letter word is inherent to any real estate deal, whether large or small. He acts as a bridge between a buyer and seller and sees the deals through. Helping both the buyer and sellers to realize their respective objective.

At present there are almost no entry requirements to become a broker. Just about any one and every one can become a broker - an agent or a professional or a trader or an actual builder. There is no specialized training that is required. There are no minimum criteria, which sets a professional broker apart from the rest. It is easy for any one to become a broker, which makes it highly competitive. For example if you happen to have a friend, who has a flat for sale, and also another friend who wants a good flat. You simply put them together and you become a ‘broker’, though all that you are doing is putting them together.

There is a general feeling that the broker’s claim of commission for a few minutes of work of merely introducing a buyer and a seller is not justified. Adding to it is the manner in which brokers have been functioning in the past. Very often one finds the information provided by the brokers to be insufficient or even incorrect. This is one of the reasons brokers are very often looked down upon for the unprofessional manner in which they function. But it is hard to imagine a real estate deal sailing through without the broker being a part of it. They do perform important functions in making a real estate deal reach to a desired end result. They bring together the two parties: a buyer and a seller. Thus serving as a useful medium for information. Like any other field brokering is also knowledge and information-oriented business: the more knowledgeable and well informed a broker is the more successful he can be. One can simply not ignore the contribution of a broker in any real estate deal, whether big or small. Then what should you look for in your broker or in other word who is a good broker ? A good broker is the one who is able to understand buyer’s wants, needs, or what he can afford. A buyer may want a more spacious flat but may not be in a position to afford it that is beyond his budget. At the same time a more spacious flat may be available in the buyer’s budget in a nearby locality, or with another builder. A knowledgeable and well-informed broker can guide his client accordingly up to their satisfaction. A broker should also be able to predict a client's growing future needs. A buyer may be willing to settle for a smaller flat. But his growing needs, not just the growing family but also the growing concept of flexible time of working from the home, may make more spacious flat a necessity. He should be in a position to bring such points to the clients. A good broker should be aware and be in a position to inform their clients about the stamp duty, registration charges, loans and the different housing finance companies, repayment schedules, and any builder-specific queries.

A broker must also know who are the sellers, or what is there for sell. A thorough knowledge of buying and selling a flat or premises is quite essential. For convenience’s sake, most brokers are builder-specific. Their knowledge about the product on offer should be complete, not sketchy about a general availability of flats. If a broker can tell you about the: the type of the building, the quality, the specifications, the rates, the payment schedules, the delivery period and any other amenity, etc, it helps in crosschecking.

Differentiate between a good broker and a sub standard broker:

The two main parties involved in a real estate deal, buyer and seller depend upon the brokers to bring valued buyer/seller to them. Genuine and professional brokers’ data banks are always updated. They accumulate all the relevant information about the property on sale and guide the customer on all aspects concerning the deal. Many of them even accompany the customers to the lawyers/solicitors and help with the stamp duty and registration.

A substandard broker on the other hand just introduces the two parties on both the sides. After which they vanishes to mysteriously re-appear at the time of finalizing the commercial and legal terms when the documentation is about to take place. This is to claim their brokerage. It is this aspect of the brokering fraternity that makes them unpopular. The other is their knack of cutting into each other’s deals, which confuses both the parties and often jeopardizes the very deal itself.

Brokerage charges :
The brokerage is either on the percentage basis or a fixed amount basis. As a general rule or the standard practice, 1 to 2% of the entire transaction amount is what people pay as brokerage. However, brokerage for larger value deals is generally less than the small value deal. Over and above the agreed amount, service tax of 12.24% of the brokerage amount is also payable. This goes to the Government of India in the form of service tax & education cess.

The other area where brokering is very popular is in the rentals popularly known as leave and license agreement. In these types of deals the brokerage amount is equivalent to 2 months’ rent and this is a recurring charge on the lessee at the time of renewals. For longer-term leases it is 2 % of the deposit amount. For a shorter period, it can be as less as 15 days’ rent and / or 1 % of the deposit amount. There is no fixed charge laid by government and so it is always negotiate able. It is always advisable to fix the brokerage amount in the beginning stage itself. In today’s real estate market, which is a buyers’ market a buyer can negotiate a very good deal with the builder as well as with the broker. It is to be noted here that though we often curse brokers, they have an important role to play in real estate deals. With more and more corporates in the real estate market and Estate Agents Association of India gaining momentum and better organised, brokers are becoming more useful. The advent of the multi-national brokering companies and mushrooming of the Internet real estate portals is giving agents a run for their money. Earlier the information regarding property was held so closely that consumers could not look beyond the information. But now as information is available cheaply (thanks to real estate portals), consumers are becoming more demanding, forcing brokers to change their way of functioning. As a consumer you have every right to demand for better service from the broker and you would get it if you chose the right broker, factoring in all the relevant aspect.