The latest hot topic in the property sector is the latest report by Luxembourg’s Minister for the Economy, who, according to data from the competition authority, believes that property developers and estate agents have contributed to the rise in house prices.
In response to this analysis, the estate agents were keen to contribute their views to the debate, pointing out in particular that the conclusions were too sweeping, equating small structures with the largest companies in the sector, according to the article “Pas tous logés à la même enseigne” (“Not all in the same boat”) in the newspaper L’essentiel.
Through this blog, we wanted to bring more transparency and nuance to this issue, which is often addressed by the Luxembourg press.
In this context, the idea is to break down these commissions and explain all the work carried out by the agents behind the scenes, whose remuneration is synonymous with the quality of the services provided to the various parties.
We will see that this involves accurate analysis, rigorous documentation, drafting and legal procedures, but above all the agency’s experience and network. We will conclude by saying that the more complex the property, the more these aspects are maximised, and the commission is proportional to the efforts made and the agency’s ability to put suitable candidates in touch with each other.
Access to a large network of buyers and sellers, built up over time.
The first point has to do with the network that an estate agent builds up to ensure the most appropriate and simplified contact between buyers and sellers, and that’s the whole point of working as an intermediary.
A network means that estate agents have a comprehensive database of potential buyers and sellers who are currently on the market or who may be interested in future transactions. This speeds up the buying or selling process by quickly finding interested parties.
This requires resources, since it requires not only the most accurate and transparent study of the property, but also serious work on the database, which makes it possible to match demand and supply in the most appropriate and personalised way possible, not only to the seller but also to the buyer. The more the agency progresses, the stronger its base becomes, the higher the quality of its valuations and the more properties it offers. Accuracy, coupled with the quality of this base and growing customer satisfaction, form the basis of a remuneration that ensures that customers complete the transaction – a question of market experience.
Accurate valuation
The database works hand in hand with the accuracy of the valuation of a property, i.e. analysing a property, its location, its faults and advantages, and setting a price for it on the market.
The latter is crucial to setting a realistic and competitive price. Estate agents carry out an in-depth analysis of the property’s characteristics (the databases take dozens of criteria into account), its condition, its geographical location and recent prices for similar properties sold in the same locality. Thanks to their expertise and experience of similar transactions, they help sellers to obtain the best possible price for their property and help buyers to make an offer that is consistent with the value of the property. The most common problem with unsold properties is, of course, over-valuation by clients who do not have such precise knowledge or experience of the market.
In a context of galloping interest rates, precision is one of the most important levers, because it allows you to be realistic about the market situation, and it allows you to negotiate with the buyer (we explain in a blog that in the absence of a price reduction, which is now slight in Luxembourg, negotiation is once again essential on the buyer’s side).
Marketing and promotion
Estate agents give visibility to the properties they represent. This includes creating accurate and attractive descriptions, taking professional photos (don’t hesitate to compare photos on the Van Maurits immobilière website with amateur photos on various platforms), placing ads on real estate websites (which are not necessarily free), using social networks, etc.
Well thought-out promotion helps to attract a larger number of potential buyers, which increases the chances of closing a sale quickly.
The upkeep of estate agency windows is also a cost-generating element for the agency.
Marketing is also necessary in order to conclude new sales mandates and to find new customers and properties to sell. Let’s not forget that the Luxembourg market is under pressure, there are not enough sellers compared to the number of buyers, and estate agents help to convince new sellers to enter the market, which is essential and requires a lot of energy.
Professional negotiation
Estate agents are also negotiators. They act as impartial intermediaries in negotiations between buyers and sellers, helping to maintain a cordial relationship and achieve fair results for all parties. The aim is to reach a satisfactory agreement that suits both parties, and this requires not only an arbitrator, but also someone who is flexible and can adapt the transaction to each individual. As we shall see, negotiations take the form of deeds, compromises and contracts, and the legal aspects and experience associated with these adaptations are crucial.
Don’t forget that customers are not always Luxembourgers; there may be people from the surrounding regions, but also from much further afield, and negotiation requires linguistic skills as well as adapting to more restrictive demands in terms of distance or different cultures.
Drawing up legal documents and administrative management
As we have seen with the database and the network of buyers and sellers, property transactions involve a heavy administrative workload.
Estate agents take care of preparing the necessary documentation, including mandates, contracts of sale, offers to purchase, and even notarial deeds via the “compromis de vente”. The latter, a synallagmatic deed in which the will of the buyer and seller meet, is essential to the transaction and sometimes requires hours of work. While there are a number of models available, a quality agency must work with its advisers to draft a preliminary sales agreement that is up to date with current legislation and must adapt it to the specific features of the transaction. The more complex the transaction (and this often goes hand in hand with the price of the sale), the more attention the “compromis” requires, because the clauses to be included very often depend on the wishes of the client, and there are many personalised requests. This is normal, as buyers and sellers don’t carry out transactions every morning, and the agent must therefore demonstrate rigour and professionalism at every stage of the drafting process.
The agent accompanies the seller from the sales mandate through to signature before the notary and ensures that the relevant deadlines are met.
Administrative management is also linked to anti-money laundering and RGPD (data protection) aspects, and the more complex the transaction (particularly the more parties or numbers of people involved in the transaction, not to mention the presence of companies in some transactions), the more time devoted to these aspects is important and mandatory under Luxembourg law.
An estate agency like Van Maurits also has to deal with purely internal administrative management, since there are several agents to support, contracts and negotiation of the distribution of commission, and premises to manage (we have an agency on Boulevard de la Pétrusse in Luxembourg but also in Niederanven).
Lastly, not all transactions are carried out between Luxembourg clients or even on Luxembourg soil, so the agency must adapt and inform its clients about tax aspects and keep up to date with foreign regulations (in France, Belgium and Germany in particular and for the simplest cases).
Personalised support
Our estate agents provide personalised support throughout the buying and selling process. They listen carefully to their clients’ needs, preferences and budgetary constraints, then guide them towards the properties that best match their criteria.
They are available to answer any questions or concerns, providing a quality customer experience.
Easier access to legal advice
Estate agents need to maintain close relationships with lawyers specialising in property law and, where appropriate, tax law.
These partnerships make it easier for customers to access professional legal advice on complex issues or particular situations requiring specific expertise. This is essential, because for some compromises, situations are complex, and recourse to legal professionals is necessary.
By working with a long-standing legal adviser, the estate agency can ensure that its customers’ specific needs are taken into account and clarified in the legal documents relating to the transaction.
Visits and rental management
Real estate agents organize property visits for potential buyers, coordinating schedules and ensuring that owners are ready to welcome them.
They also ensure that all stages of the transaction are completed on time and in line with legal requirements, guaranteeing a secure and hassle-free transaction.
This is all the more true for rentals and flatshares, where there is a large number of applicants and a real need for application management. Rentals are sometimes short, so the work often has to be repeated.
In terms of legal aspects, not only leases but also shared-tenancy documents need to be personalized to ensure smooth, unblocked rentals in the future. Situations can be complex (e.g., shared-rental contracts with many rooms), and this requires time and effort. Note that simple rental leases can be very detailed and personalized, the clauses must be fluid, clear and coherent, and pre-written templates are not enough to meet these criteria. This ensures that the lease is secure and that there are no legal uncertainties later on.
The agent must find the best candidate, so that he or she is not only comfortable with the tenancy, but also meets the landlord’s criteria.
Complexity and commission
From the outside, we don’t realize the potential complexity of a transaction, whether it’s a sale or a rental.
This may be linked to the properties themselves, complexity often increasing with price, since the price implies distinctive surfaces and configurations from the more ordinary market, thus requiring personalized analyses and price estimates whose work is proportional to the originality and specificities of the property.
The market price is often determined comparing similar properties, but certain configurations are often found on the market, and the larger and more complex the surface area, the more in-depth the work must be, as transactions become rarer and the market price more difficult to determine.
Transactions are rarer, because, by the same token, there are fewer candidates for purchase, or even a very limited list of potential buyers.
It’s clear, then, that the agent’s energy is far more important, and the difference is made by what we’ve mentioned throughout this blog: the precision of the work, the experience and the agency’s network. Obviously, the more complex the property and the higher the price, the more these three aspects are reinforced, particularly the third point. So it’s not the transaction stricto sensu that’s remunerated, as if it were automatic and self-evident, but the agent’s experience and ability to put the right candidates in touch with each other.