Each country has its own mode of operation regarding estate agency. In Cyprus there is the Estate Agents Law which regulates most items, but yet people coming from different countries have their own country’s system, which, at times, creates confusion.

• Finding a property – It is normal abroad, to pay a fee to an estate agent to find a suitable property for an investor.
  
  The fee may range from 1%-2% on the purchase price as a finder’s fee. In such cases however there must be an explicit provision in the agreement, should the parties agree, that the agent will not claim a commission from the seller in addition. In Cyprus this finder’s fee is rarely adopted. If someone wants a particular property, he will appoint several agents to find and the agent in the event of a successful deal, will receive a commission from the seller.
  
  The first approach may be beneficial to the buyer, but then, the buyer must appoint more than 1-2 agents, otherwise they will not be particularly interested, whereas the agent is not beyond him to get a kick-back commission under other agreement from the seller.

• The commission in some European countries, depending on which country one is dealing with, is split 50%-50% between the buyer and the seller. Having set the total percentage, other countries have other split, whereas in Cyprus the commission is paid wholly by the seller. In Cyprus circumstances, the agent’s job is to find an able buyer who he introduces for the asking price of the seller. If he does and the seller refuses the deal, the estate agent might ask for a full commission or “expenses” which is not clear (under the law) what this means. If the agent covers for example advertising, spends time by taking people to view the property etc, this is expected to be his expenses and the actual costs and time. In several cases however which were decided both by the U.K. and Cyprus High Court, there are several judgments that the court might decide the full payment of a commission.

• The commission is that percentage agreed between the parties (or a fixed sum) and there is no limit. The agreement must be in written otherwise the law states a 3% commission on the agreed price. The commission may be payable even if the deal does not go through e.g. in case the seller changes his mind, but if there is a clause in the contract e.g. stipulating that upon finance being secured and it is not, the seller might not, have such a liability.

• It is normal abroad for an estate agent to offer his opinion on the value of the property in order to guide the seller. In Cyprus this is also done, but an estate agent may not issue a written valuation report as such. It is also notable that in order for an agent to get the client’s listing, he quotes a high sales price in order to keep the seller happy, notwithstanding the fact afterwards that he cannot sell it, or he finds excuses for not being able, causing damage to the seller. We are aware of 2-4 estate agents of such a nature, quoting unattainable sales prices 11/2 -2 times of the going rate so that they secure the listings.
  
  In Cyprus valuations are carried out by registered valuers registered as such with the Technical Chamber of Commerce. If not, do not bother. We will say that valuers are more independent from an estate agent’s opinion.

• In Cyprus, especially amongst local sellers, is not ordinary to give exclusivity of sales. The word exclusivity means that even if the owner/ other agent sells the property, the seller must bear in mind that he owes a commission for the exclusive agent even if he did nothing. So he might stand even to pay a double commission.

• There are many arguments for and against exclusivity appointments. It is normal for the European countries, but if you opt for such an alternative, place a time limit for the exclusivity say 6 months. Bear in mind that if a buyer is introduced by the exclusive agent and the potential buyer buys the property after the expiration of the time limit, the agent might have a case against the seller.

• It is not uncommon to have the buyer and the seller to agree to “cheat” the agent and thus save the 3%-5% + VAT commission with the seller reducing his price accordingly. We have a couple of such cases and we are now at Court placing a “no transfer order” on the property, so the buyer/seller is at a limbo (for the last 2 years).

• Our advice is to be open with the agent (the seller) and with the seller (the agent) in order to avoid complications afterwards.

• Bear in mind to use a registered under the law estate agent. If not, the seller will not be able to deduct the commission from the sales price as a tax deduction and the non licensed “agent” might end up in prison (1 year) for acting as an estate agent whilst he is not so registered.

• There are complaints that the local estate agents commission is high (3%-5%-8% rate on sales price depending on the circumstances), as opposed to the 1%-2% charged abroad. But then the values here are a portion of what the property values are abroad in the European countries. So it is logical for these properties which are in high demand, the 3%-5% commission and for those with a difficult sale 5%-7%. If one reduces an agent’s commission it will not be the agent’s priority to sell the property if he has similar properties with a higher commission.

• If you want to place your trust in a single agent make sure what he is going to do about promoting your property. Visiting your agent at intervals in order to be updated it will not be a miss.

• Because the local estate agents law places on the registered estate agent several responsibilities, we recommend to the agents to pass on the contract of sale to the lawyer, who will check the various items (e.g. building permit, waiver of mortgages etc etc). Notwithstanding their procedure in their own country, foreign buyers in particular when in Cyprus do not do their due diligence. So another point to note is to appoint a solicitor. Mistakes do happen however regardless.

• A most interesting case is coming up in the European/local courts with particular reference to a U.K. advisor/estate agent who got a 15% commission (see a previous article on the subject). A law suit has been lodged not only against the foreign agent/intermediary, but also against a bank, since there is a claim that the bank has financed buyers who did not have the capability of repayment. A most odd claim but then what do we know about such legal issues? It will be most interesting to see the end result.

• The best method to test the market is the use of public auctions. We have tried this at a considerable cost, as well as others, but it seems that notwithstanding the merits of such a mode of sale, it does not have the acceptance especially from locals, mainly relating to local attitudes, whereas the local banks seem to be unwilling to join.

So when using an estate agent these are some of the points to bear in mind. Several years ago we published a booklet regarding estate agents duties and responsibilities (in the Greek language we are afraid) which give a good picture to those who are involved. In Cyprus, the local estate agents, still have a long way to go in order to upgrade this profession. A point in hand is the several tens of illegal estate agents operating (especially at Pafos) with full page “family” photos in the weekly press and notwithstanding that the police has reported them to court, bearing in mind the delays in court proceedings they are still up and running as if nothing is happening, whereas this state of affairs encourages others to set up. Care is needed we are afraid.

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