Property Agent Fee for Selling or Renting a House in Malaysia

This guide explains the fees real estate agents charge when selling or renting out properties. Understanding these charges is vital when you’re in the property market.

1. Real Estate Agent Commission for Selling a House

Real estate agents have varying commission rates based on the property type they sell.

When selling land and buildings, their fee can reach up to 3% of the property’s selling price. For instance, if a house sells for RM100,000 at a 3% commission, the agent earns RM3,000.

Apart from land and buildings, real estate agents also facilitate the sale of other properties, such as factories, machinery, and businesses. The commission rate can increase to 10% of the sale price in these cases.

2. Real Estate Agent Fees for Renting a House

The commission for renting out a property through a real estate agent depends on the duration of the rental contract.

  • Up to 3 years: 1.25 month’s rent
  • More than 3 years to 4 years: 1.5 month’s rent
  • More than 4 years to 5 years: 1.75 month’s rent
  • Over 5 years: 1.75 month’s rent

For example, if the monthly rent is RM1,000 for a two-year contract, the agent can charge a fee of RM1,250. However, in the Klang Valley, agents usually charge a minimum fee of one month’s rent for house rentals.

3. Is Service Tax Payable?

Registered agencies are required to collect a Service Sales Tax (SST) of 6% on the commission. If the agency fee is 3%, the SST payable would be 0.18% (6% SST x 3% commission), totaling 3.18% of the sale price.

For rentals, if the fee is RM1,000, the total amount collected by the agent will be RM1,060, including SST.

4. Payment Method for Real Estate Agent Fees

Many hesitate to hire a real estate agent because they think they need to pay upfront or from their pocket.

In reality, that’s not the case. Real estate agents cannot ask for an advance payment from sellers, which goes against ethical practices.

The fee is only payable if the sale is successful, i.e., after the seller and purchaser sign the sales and purchase agreement.

The correct payment sequence works like this:

  1. When buyers are interested, they pay a booking fee deposited into the agency’s client account. During this time, the booking fee remains in the client’s account. The agent only acts as a stakeholder and has yet to withdraw it as their commission.
  2. The agent then assists the buyer in securing a loan and connects them with a lawyer.
  3. If the buyer decides to cancel the purchase, the booking fee is forfeited. The agent will release the funds, with half of it paid to you as compensation.
  4. On the other hand, if the seller decides to cancel the sale, the agent refunds the money to the buyer.
  5. Only after you and the buyer sign the sales and purchase agreement can the agent withdraw the money from the client account and claim it as their commission.

In short, you don’t need to pay the agent upfront. The payment comes from the booking fee paid by the buyer.

5. Why Property Agent Fees Are Expensive?

Real estate agent fees can be substantial. However, there are reasons why real estate agents’ commissions are high.

When selling a house, agents have to carry out many steps:

  • Check the current market price of the home.
  • Visit the house to evaluate its condition.
  • Provide advice to the seller.
  • Prepare advertising materials.
  • Conduct advertising.
  • Filter potential buyers.
  • Show the house to prospective buyers.
  • Help buyers get suitable bank loans.
  • Connect sellers and buyers with banks.

Agents consistently perform these tasks. Should a prospective buyer view a property but not purchase it, the agent will repeat these tasks until the property is successfully sold.

These activities incur expenses, yet if the property does not sell, you are not obligated to cover these costs.

House sales are often quicker with agents because of their market expertise and professional networks.

Agents know which banks are best for buyers to obtain loans from and will recommend experienced real estate lawyers.

While you can sell your house on your own, in many cases, it’s more effective to sell through an agent.

6. Who Governs Real Estate Agent Fees?

The profession of real estate agents is regulated just like other professionals. The Board of Valuers, Appraisers, Estate Agents, and Property Managers (LPPEH) is the body that governs this profession and sets the fee structure.

7. Overcharging by Agents

If an agent charges more than the standard rates, it violates the LPPEH standards. In such cases, complaints can be filed against the agent.

8. Can You Inflate the House Price to Cover for the Agency Fee?

You can choose to inflate the selling price of your property to cover the agent’s commission.

For instance, let’s say you want to sell your house for RM500,000, not including the real estate agent’s commission.

You can ask the agent to list your house for RM515,464 (100/97 x RM500,000).

This means the price you want for your house doesn’t include the agent’s fee.

However, be cautious with this approach. When you increase the house price to cover the agent’s cost, your house may be priced higher than others in the market, affecting its saleability.

The price might also exceed the market value, lowering the chance of securing enough loans for the purchase.

Before going ahead with this method, it’s wise to seek advice from your agent first.

9. Co-Agency and Commission Payment

When two agents collaborate to sell your property (co-agency), one represents the seller and the other the buyer. In this scenario, the seller’s agent commission is still 3%, split between the agents (1.5% each).

10. Agent Fee is Tax Deductible

The agent fees you pay can be used to reduce the Real Property Gains Tax (RPGT) charged by the Inland Revenue Board of Malaysia.

When selling a house through an agent, you should request a payment receipt from your appointed agency and submit this document to your lawyer for calculations.

You need to provide this payment proof to your lawyer before they send the calculations to LHDN. This is usually done one or two weeks after you sign the sales and purchase agreement.

Final Words

That’s all. I hope this article helps you navigate the process of selling or renting out properties. Before I end, below are a few more articles in which you might be interested:

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