3 Shocking Ways Estate Agents in Nigeria Make Money and What It Means for You

Ever find it strange that an estate agent is keen to show you some homes and not really so keen on showing you others?

Perhaps you’ve looked for a house to rent, purchased land or even attempted to sell property in Nigeria. And wondered what exactly goes into the making of an estate agent. It is understood that agents play a vital role in bringing buyers and sellers together. Landlords and tenants are together, but not many people know how agents make their money.

The lack of understanding can generate confusion. It may seem like an agent has your best interests in mind. But you’ll find out that their advice is being driven by their profit margin. Meanwhile, you might think that agents’ fees are unnecessary without being aware of all the work they do to close a real estate transaction.

The reality is that it is not the extremes of the two that is true, but rather something in between.

Estate agents offer many useful services, but they are also running businesses. As a result, your income stream can have a direct impact on your selection of the kinds of properties you would be looking at. With the knowledge of how the system operates, you are better protected in maintaining your interests, negotiating, and preventing expensive errors.

Where Estate Agents Really Earn Their Income 

The most common way of earning is in the form of commission for the majority of estate agents in Nigeria. Simply put, they earn a certain percentage of a property’s value on each deal.

The agent will usually take an agency fee from you if you are renting an apartment. This fee is usually a percentage of the annual rent in many cities. Particularly Lagos, Abuja and Port Harcourt. Thus, the higher the price of the home, the more the agent will make.

This is the same with property sales.

In the real estate industry, agents earn a commission based on the actual selling price. This is when they assist a seller in selling their property. Thus, the more expensive the property, the more money the agent will make.

This commission-based plan helps to clarify some of the behaviors exhibited by many property seekers.

For instance, when a commission shows you higher-priced properties, it’s because those properties will provide him with more commissions. Not all agents are dishonest, but it does indicate that their interests may not always be in line with yours.

But there are other ways to make money.

Certain estate agents make profits through property management services. In the case of a landlord who owns several rental properties, the agent might be responsible for collecting rent. Arranging maintenance, resolving concerns of tenants, and managing overall operations for the owner. The agent then gets the fees for managing the tree.

Others make money by marketing arrangements with the developers.

Real estate developers sometimes hire real estate agents to market and sell housing units. This is usually done when they start a house-building development. They make a commission on every sale they make. This means that you may find agents pushing certain developments more than others. This is because they come with great incentives.

Partially, referral fees are also involved.

An agent can arrange for you to meet with surveyors, lawyers, valuers, mortgage companies, and contractors. And get paid for the referral. While this practice is widespread across various sectors, it is crucial information to consider since it can affect recommendations.

After this, many things in the property market will make sense.

How Their Income Can Influence Your Decisions

Commission earned by estate agents is not a negative thing. After all, it is the job of a professional to get paid for their job. The issues only come when you’re unaware of how such commissions can impact your advice.

Suppose you have a limited budget and are looking for an apartment.

There are times when an agent might be more motivated to sell an above-market-value property, as he/she is paid more for a higher rent. They could recommend you other investment alternatives. Or that you take a few extra pennies out of your budget. Some of the suggestions you may find could be helpful, but others are just to make more money for them.

That is why it is still significant to do independent research.

If you’re just following the advice of the agent, you may wind up seeing things through the agent’s eyes and not yours. As a result, you might end up missing out on the right properties that are more affordable.

This can be the case when buying the land.

Some agents actively market certain areas due to their exclusive dealings with sellers or developers. Those may be good areas to consider. But it’s important to confirm with information on infrastructure. Also the title documents, access, and plans for future development.

Other incentives are relevant during negotiations.

If the agent’s commission is based on the selling price, then the agent may not feel like pushing hard on your behalf. In some instances, it is better to secure a quick deal than the best price.

Not all agents are like this. Many professionals value client satisfaction. They do this as a key to long-term success is referrals and reputation. However, being familiar with these incentives will benefit you in asking better questions and make better choices.

Fees are another aspect to consider.

There are some property seekers who only observe rent or purchase price without taking into consideration the agent fees, legal fees, agreement fees and other fees. Unfortunately, such costs can make up a lot of the total payment.

If you get a full breakdown of the costs from the outset, you will be less likely to get any nasty surprises.

Creating a win-win situation with agents without losing money

So it’s not a wise idea to completely steer clear of estate agents. Rather, know how to work them effectively.

First of all, understand that an agent is a service provider and not a decision maker! Their job is to offer possibilities, supply info, and make trades simple. Ultimately, though, it is your choice.

This means never feel forced to make a commitment right away.

Do not take properties for granted; do a thorough inspection. Compare multiple options. Verify ownership documents. Research neighborhoods independently. The more information you collect, the better your position will be.

Communication is also a key element of the equation.

If your budget is set, be firm and stick to it. If there are certain requirements, state them early on. This will save time and enable the agent to find appropriate options quickly.

It is important to ask specific questions relating to fees as well.

An agent should be clear about the agency fees and management fees. As well as any other fees that would apply to the transaction. If explanations are unclear or confusing, it is a red flag.

The verification is even more important

To get documentation verified, use legal experts before paying for land or property. The agent is an important figure, but no substitute for proper due diligence.

Most importantly, see the relationship as a partnership and not as a dependence.

A good estate agent will help save you time. Will give you market information and prevent you from making common mistakes. The most successful property seekers realize, however, that agents have financial goals as well.

Once you see how estate agents make money, you don’t take their advice as gospel and start looking at it with the right perspective. This little change can make a big difference in negotiations. It saves you from extra expenses and allows you to make better property decisions.

After all, it isn’t about mistrust when it comes to understanding how estate agents are paid. It’s a matter of consciousness. And in Nigeria’s quick-changing property market, awareness is 1 of the most important possessions you may have.