The profession of property agents might not be as straightforward as it seems. From the outside, life can appear glamorous. Agents can work flexible hours, have the versatility to handle different types of properties and earn an uncapped income.
What is not always seen on the surface is the uncertainty that comes with working in an increasingly competitive market.
Before an agent earns from a transaction, money may already have been spent on advertising, branding and lead generation.
Having previously experienced challenges on the frontline, Core Proptech founder JJ Liau shares a few big issues that come with the job.
“Agents invest their own money in advertising, branding and lead generation while taking on the time and financial risks of each transaction, often without knowing when or how much they would eventually earn or when they would receive their commission,” he says.
The nature of the profession has also evolved, says Liau.
Agents are increasingly responsible for generating their own leads and building their own personal brands, effectively taking on some of the characteristics of independent business owners.
Unfortunately, the traditional commission structure has not necessarily evolved at the same pace.
“When a developer offers a commission, it may pass through team structures, management levels and other overriding mechanisms before the remaining amount reaches the individual agent who actually sourced the customer, managed the relationship and closed the transaction.
“As a result, the front-line agent may receive only a portion of the original commission offered by the developer,” Liau explains.
What does reach the agent?
The headline commission is not necessarily what an agent takes home at the end of the day.
According to an article by PEPS Ventures, a typical property sales commission in Malaysia ranges from 2% to 3% of the property value but the commission could subsequently be divided between the agent and agency.
Depending on the agreement, PEPS estimated that agencies may take between 30% and 50%, leaving the agent with between 50% and 70% before other expenses are taken into account.
Those expenses can add up. Marketing and advertising alone can cost an estimated RM500 to RM2,000 a month while agents also have to account for petrol, tolls, parking, phone bills, professional fees and other costs just to keep going.
To illustrate how the numbers can change, Liau gave a rough example of a RM1mil property carrying a 5% developer commission, putting RM50,000 in total commission on the table.
Under an illustrative conventional agency structure, if 1.5% goes to the agency and another 1.5% goes towards overriding, the individual agent could be left with 2% or RM20,000.
Liau stressed that the actual split varies depending on the project, developer’s commission rate and applicable agency structure.
Traditional agencies also do more than divide commissions, providing training, mentorship, leadership, team development and compliance support, particularly for newer agents finding their footing in the industry.
This means for experienced agents who already generate their own leads, fund their own marketing and manage their own client relationships, the calculation can look very different.
And for developers, this raises another issue to think about.
Agents may be one of the closest links between a project and its prospective buyers, but they still have to decide where their limited marketing budgets, time and effort are best spent.
Not quitting, just being selective
Rather than seeing experienced agents simply withdrawing from the industry or quietly quitting, Liau says agents are becoming more selective about where they put their resources as competition intensifies.
“When agents do not clearly know how much they will ultimately earn, they may become more cautious about investing in advertising, marketing and lead generation or hesitate to commit resources to certain projects because they are uncertain about the eventual return,” he adds.
For experienced agents, the shift can be particularly noticeable as many already operate with considerable independence.
“They fund their own marketing, generate their own leads and manage their client relationships. Naturally, they are looking for a model that gives them greater earning potential, transparency and efficiency in how they operate,” he says.
In other words, an agent is his or her own business.
Every advertisement becomes an acquisition cost and every lead represents a potential return. A delayed commission can also affect how quickly money can be put towards generating the next sale.
For someone relying predominantly on commissions, cash flow can determine how quickly money is reinvested into marketing and lead generation.
Liau notes that faster access to commission income could allow agents to reinvest in digital advertisements, property portals, content creation and other methods of generating their next batch of leads.
Different agents have different needs
None of this necessarily means that the traditional agency model has lost its place. Traditional agencies continue to provide important value through training, mentorship, leadership, team development and compliance support, particularly for newer agents or those who want to build and lead teams.
More experienced agents may simply begin looking for different things from the structure around them. Alternative models like the services offered by Core Proptech have emerged, promoting greater commission transparency and different payout structures for agents who are comfortable managing their sales more independently.
“So, the traditional agency model still works but it may not be the best fit for every agent, particularly those who are already operating their business independently,” Liau said.
As the way agents work continues to evolve, the economics surrounding the profession may need to evolve with it. A commission could look really attractive on paper but the headline figure does not necessarily reflect what eventually reaches the agent after the different layers and costs are taken into account.
For agents increasingly funding their own marketing, finding their own customers and carrying much of their own risk, what matters is not simply the commission offered. It is whether the eventual return reflects the time, money and effort that went into securing the sale.
So for a profession increasingly characterised by agents funding their own marketing, finding their own customers and carrying much of their own risk, selling property is like a mix of making the numbers work and earning the proportionate commission for their efforts.