Commission.

It’s a fee paid for enabling contact or a service. That’s how I understand it. I’m not against it, but at times, can’t understand the value demanded by those who live off it.

Prime examples of commission proving to be a pain in the seat is when house hunting. And I’ve felt this pain many times over the last few years. None more so than in 2007 when I moved into my current rented accommodation in Pune. I’d paid commission in Mumbai and Bangalore previously where the norm was one month’s rent by the tenant and one month’s rent by the landlord (or so I believe… I couldn’t know for sure since I was always the tenant). In any case, I had never paid more than 30 days’ equivalent of rent to a broker/agent.

In Pune, though, landlords are truly lords. They don’t pay commission. The tenant needs to pay for two months’ equivalent. And there is really no scope for negotiation. 45 days? Bah. 50? Get out. 60 days’ minimum.

Now presently, I am looking for investing in property. And given my past experience, I am avoiding estate agents. They are as abundant as the H1N1 virus in Pune, mind you. But like with renting, they do ask for 2% of the flat value in commission. I believe the norm elsewhere is 1%.

A couple of days ago, I called inquiring about a resale flat close to where I am currently living. Convenient location etc so I don’t mind having to pay a little more for a slightly smaller house. The call went to an agent. And before I could even really ask for the location or the details of the flat or fix a time to see it, he blurts out, “We charge 2% commission.” Uneasy silence follows as I calculate how much that affects my budget. Considerably.

Eventually, it’ll probably come down to getting lucky and being able to buy a flat from an owner directly. Tough, but not impossible. Or foregoing doing up the kitchen and the bedroom if I have to pay the agent. Yes, it costs that much.

It also doesn’t help that these guys almost always tag along with you to show you the property. So they spend little on travel. Then, they will show you the property by remote, i.e., call another ‘network’ agent and have him show you. Expense? Rs 1 max for the phone call. Sure the commission will get split, but for that house that they may show 100 people before selling, their expense, I estimate, would be no more than Rs 1,000 or let’s give them the benefit of doubt and say Rs 5,000. They will make a minimum of Rs 25,000 for a flat worth Rs 25,00,000 at 1% commission. Most flats cost way more. Now that’s a business to be in! Margins of minimum 500%!

Any colleges willing to offer it as a course?