Who Bears The Bill For Property Agent Fees: The Buyer Or Seller?

·7-min read

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Unless you’re someone with multiple connections and friends, chances are that when you’re buying or selling a home, you’ve gotta rely on the wonder of online property websites.

Some of these include property groups on Facebook, and of course approaching an agent to help you in the process.

If you’re feeling concerned about talking to a property agent because of their fees, it really shouldn’t be something that’s feared!

You see, the commission fees of a property agent is nothing to worry about, ESPECIALLY when you’re trying to buy/sell your property as soon as possible.

But, what are the perks of enlisting the services of a property agent? For one, it’s super convenient as you don’t need to look for buyers or sellers yourself.

There are also property agents who are willing to go the extra mile, such as helping you apply for a mortgage, run background checks on potential buyers, conduct checks for defects, selecting the best unit for you, and even assisting you with your home insurance!

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What Are The Property Agent’s Fees For?

Let’s look at it this way: property agents are an all-in-one package. They’re the marketing team, sales team, creative team, and MORE - all packed in one punch!

Their job is to promote and market a property as creatively as possible, to close a sale. As mentioned above, they even help you check for defects and handle all your important documentation.

There are also stories of agents who go the extra mile for their client. For example, an agent is about to bring potential homebuyers to a house-viewing of a beautiful bungalow with lots of extra land.

Unfortunately, extra land means extra greenery, and that results in overgrown weeds while the property was left empty.

The agent willingly spent money out-of-pocket to cut the weeds so that the house was more appealing when the homebuyers visited.

As a whole, a property agent’s fees also includes the cost of marketing material, printing or making copies of documents, and their travelling expenses, on top of actually finding quality buyers for your home.

One good thing to take note of however, is that the first 3 costs listed cannot be incurred by your agent without prior approval by you, the client!

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prop-agent-fees1

So How Much Should I Pay My Property Agent (REA)?

According to the Malaysian Institute of Estate Agents (MIEA), for the sale and/or purchase of land/buildings within Malaysia, the agent’s commission fees are set at a maximum of 3% of the property’s sale price.

However, this fee is subject to a minimum of RM1,000 per property. As for personal property (also known as chattels) including plant and machinery, 10% of the proceeds are chargeable for agent fees.

PropertyGuru Tip
Do note that these fees are only applicable for properties <strong>built in Malaysia and by Malaysian developers</strong>. If you’re considering purchasing property overseas but by a Malaysian developer or a Malaysian project from a foreign developer, the fees are charged differently.

What about RENs? How Much Should I Pay a REN?

Since the process to become a REN requires less qualifications than an REA, one would expect their commission rates to be lower.

The truth is, RENs are subject to the same commission rate as REAs.

That is, a maximum of 3% of the property’s sale price.

If a REN is helping you in your sale or purchase, remember that registered RENs must be linked full-time to a real estate firm.

How Much Should I Pay My Agent for Rentals?

For homes or rooms to let, the fees are as below (according to the MIEA), or subject to a minimum fee of 1 month’s rental.

If you will be renting for a year or less, the fee is pro-rated. These rates do not apply for serviced apartments and serviced offices.

We’ve compiled a table below of how much you can expect to pay for property agent fees when it comes to rental properties:

Property Agent Commission Rates for Rental in Malaysia:

Duration of rental

Minimum fees

Up to 3 years

1.25 months of gross rental

Exceeding 3 years, up to 4 years

1.50 months of gross rental

Exceeding 4 years, up to 5 years

1.75 months of gross rental

Exceeding 5 years

1.75 months of gross rental

Exceeding 5 years (without the option to renew)

1.75 months of gross rental

Exceeding 5 years (with the option to renew)

1.75 months of gross rental + 0.25 months of rental for every additional year

When this all boils ​down to who foots the bill for the property agent’s fees, the answer is…

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prop-agent-fees3

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Both! Although, technically, it should be the seller. It sounds complicated, but hear us out.

You see, the seller is the one who should pay the property agent’s fees but they have the option to include it in the listed price, hence, the selling price of the property would be RMx + 3%.

Therefore, when you purchase a property, the agent’s commission is ‘passed on’ to you as you, the buyer, are the one paying for the property.

When Would I Need To Pay My Agent?

Ah, there has been some confusion as to whether you should pay your agent upfront, after the legal document is unconditional and has been signed by both parties, or only when everything has been stamped.

Well, according to the Malaysian Estate Agency Practice (MEAS), there's a handy part under Standard 7 that would help clear the air:

7.2.2.1 If the sale and purchase agreement or letting agreement is unconditional, the estate agency fee is due upon the signing of the sale and purchase agreement or letting agreement.

Simply put, it means that you'd need to pay your agent his/her commission fees as soon as the legal document has been signed. No need to wait for the stamping, just pay up for the services provided!

But, Are There Any Other Hidden Fees?

Closing costs are one, although it’s not entirely hidden. Closing costs are any costs that are incurred throughout the entire house-buying process.

Some of these include the stamp duty, renovation/repair fees, your agent’s commission fees (if it’s not already included in the sale price of the property), legal fees, house valuation fees, and not forgetting insurance.

And who takes care of the closing costs? There’s no “only buyers” or “only sellers” rule about it, but buyers are usually the ones to cover the bulk of the cost, or all of it.

Alternatively, the contract could state that the seller has to cover a certain percentage of the closing costs; that’s where an agent with good negotiating skills comes into play for both the buyer and the seller!

To lessen your financial burden after finally acquiring your dream home, an option is to calculate the estimated closing costs and include it in the home loan.

So if the property’s selling price is RM500,000 with closing costs that are around RM25,000, you can apply for a home loan of RM525,000 from the bank.

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prop-agent-fees4

So, Do Property Agents Earn A Lot?

Property agents work very hard to close property sales and it’s definitely not as easy as it seems!

They have to sit for official assessments, examinations, and apply for their licence - all before they can even begin to think of making a profit!

Sometimes you’ve just gotta applaud them for their dedication and patience in helping us, whether it’s to find a dream home or to sell the property for a decent profit.

Not to mention that they’re probably one of the best people to know which and what kind of property is suitable for families, young couples, retirees, etc.

However, remember to always be cautious about who you’re dealing with; not everyone you meet has your best interests at heart.

Remember to do your due diligence in checking on the background and credentials of your selected property agent, in addition to asking for recommendations.

Above all, trust your gut feeling! If something doesn't feel right, it probably would be wise to find someone else.

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