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Real Estate Agents commissions in Kenya: Understanding what Commission to Charge

What is Real Estate Commission in Kenya? Real estate commission is the fee that real estate agents and brokers get paid as their compensation for the work they put in to help complete a transaction.  As RIS Media explores, real estate agents help clients with a variety of tasks throughout the buying and selling process, and compensation for this assistance comes in the form of a commission. The real estate commission also represents all the years of experience and training that the agent has cultivated to help the client get the best possible price for the home they want to buy or sell. This training and experience help them become critical experts in real estate transactions so that their clients have a strong representation at the negotiating table. What Does an Agent Do to Earn Real Estate Commission? Real estate agents can help clients with a variety of different tasks that make it easier for them to buy or sell land or a home. A real estate agent will help clients with tasks such as: 1. Letting and management agent- A real estate agent may be involved in letting and management of rental or leased properties.2. Helping a client negotiate a mortgage.3. Daily research on homes – Real estate agents stay on top of the local listings so they know if a potential house a client is interested in shows up on the market. 4. The real estate agent will also help the client set up showings so that the potential buyer can see homes that will potentially appeal to them the most. This saves the client time and they can attend to other things.5. If the real estate agent is helping a seller, the agent will help them analyze the market so they know how to set a fair price. 6. The real estate agent helps sellers market the property so they attract the attention of the best potential buyers. 7. The real estate agent may help write offers for the properties listed for sale that clients want to buy or sell. When a client finds a home that fits them well, the agent will help them determine the best price to offer, negotiate with the sellers, and write up the offer to submit. There will often be negotiations with the home seller before an offer is accepted, and the real estate agent can help buyers understand and navigate the process; the client will have someone representing their interests. The real estate agent can also help sellers negotiate, ensuring that the client gets the best possible price for their property. 8. Help with due diligence -Due diligence is a critical part of the home buying process, as it will help new homeowners avoid large unforeseen costs and problems with the purchase. The real estate agent can help buyers set up and then work through this process.
In Kenya, real estate agents either work in a real estate agency or can be solo agents. When working in an agency and an agent is formally employed, then they earn a salary that is determined by the contract of employment.Most real estate agents in Kenya earn a commission from sales. The commission is set by the Estate Agents Act (Cap 533). The commission to real estate agents in Kenya are payable in 5 scales as: 1.     SCHEDULE Scale 1 Sale: This is paid on a graduated scale (a)    On the first Ksh. 100,000 10%(b)   On the next Ksh. 900,000 6%(c)    On the residue 3%Thus, if you are a real estate agent and help a buyer sell their property, above is the amount set in law. 2.     SCALE 1A Purchases: This is also paid on a graduated scale (a)    On the first KSH. 100,000 5%(b)   On the next Ksh. 900,000 3%(c)    On the residue 1.5%Thus, if you are a real estate agent and help a buyer buy a property, above is the amount set in law. 3.     SCALE 1B On Sales of Plant and Machinery:Ten per cent of the total value realized. (a)    SCALE 1C Sale and Purchases Effected by a Transfer of shares:(b)   Scales 1 and 1A shall apply undiminished by any loan or other charges upon the property or the Company’s assets. 4.     SCALE 2 LETTINGSResidential:(a)    Lease up to one year 7.5% of annual gross rent.(b)   Lease of over one year One months rentCommercial:(a)    Sole agency 7.5% of annual gross rent(b)   General agency 10% of annual gross rent.Fees by negotiation if management services involved but not less than half scale. 5.     SCALE 3 (a)    For seeking and negotiating the tenancy or lease of a property to suit a clients requirements: The fees payable as per the appropriate letting scale and by arrangement if negotiations abort. 6.     SCALE 4 MANAGEMENTResidential:a)      10 per cent of the gross rents or less according to the circumstances but not less than 5 per cent.b)      Commercial:c)       7.5% per cent of the gross rents or by arrangement but not less than 2.5% per cent7.     SCALE 5 Mortgages:For negotiating the terms of mortgages or charges as an intermediary between or on behalf of either of the principals:a)      In case of a successful deal, the agent is entitled to a negotiated commission but no fees.b)      Where agent is instructed to fund and negotiate a mortgage without handling the sale: Fees to be not more than 0.25% per cent of the capital value of the mortgage.
If the above rates drive you to get into real estate, you can start by registering to list your property for free. Also remember to get your letter of authority to sell as described so that you do not miss your commission.As you continue engaging in real estate, remember to register with the Estate Agents Registration Board(EARB). This way, you have legal protection in case the seller does not meet their obligations. We have had cases of real estate agents getting low commission than what the law mandates since they were not registered as real estate agents in Kenya. If you are not registered, you risk losing your hard-earned commission and lack good legal support. You may also face legal penalties. Learn more about the benefits and how to register as a real estate agent in Kenya. Section 18 of the Estates Agents Act Cap 533, Laws of Kenya provides as follows: – 1.       After the expiration of six months from the commencement of this Act or such further period as the Minister may, by notice in the Gazette, allow either generally or in respect of any particular person or class of person: – Ã‚·       No individual shall practice as an estate agent unless he is a registered estate agent;·       No partnership shall practice as estate agents unless all the partners whose activities include the doing of acts by way of such practice are registered estate agents;·       (c) 2.       Any person who contravenes subsection (1) shall be guilty of an offence and liable to fine not exceeding twenty thousand shillings or to imprisonment for a term not exceeding two years or to both. While the above is developed for a general understanding, it is not meant to be legal advice. Do not hesitate to contact your advocate for legal help. If you need one, you can real out to us on 0726982982 or on email [email protected]

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