There are two types of agency - those who charge commisions that inflate the price of the property, and those who charge a fair commision which means the client is paying the correct market value for the property. Of the 2 options you have outlined, we are NOT in the commision category that would by your calculations "rip clients off".
Any property price should be calculated on a price per sq/m calculation in comparison to similiar properties in a given area. There may be some small differences in this figure due to facilities and amenities but as a general rule of thumb it works.
I agree with TRMA, and if you check out the company you will find which of the above examples they follow. We also only get a commission which will leave the property at the standard price for the market. Some builders are greedy, and they say we'll give you 10% but they have already overpriced the property to begin with, so this means the property is above market average. In these cases we either refuse to deal with the builder, or we take less commission and lower the price. We loose, not necessarily the builder. If possible if we have a cash buyer ready to buy we can get the builder to be much more realistic - when he can practically smell the money he will be more agreeable to lower his price.
It seems to me that the agents going bust are those who either rely only on overseas investment, or those who charge unfair commission rates (i.e Parador). The overseas buyers market has slowed here in Turkey in regards to UK and Irish investment, but we are still always able to sell to Turks, and other Europeans - why? because we charge fair rates. In a resale situation we charge the standard 3% commission, which is acknowledged by the Turkish goverment as a fair %. On new builds it depends on the builder and how much work we do for him or how much business we get for him. It is usually 5-10%, but even when we get the higher amount (10%), it is as TRMA says, we will have put in a lot of work and advertising for the builder, and all of these costs are absorbed by us, not the builder. however, the end price is still within market value. If we are getting commission from the bulder we NEVER take commission from the customer also.
A good way to test this is to look for a property you like, then google it and see how many others have this property and if they are all quoting the same prices? In some cases you will find agents who take less commission so that they can offer the property to you at a lower price, or they will offer something extra like white goods etc - we do this on occasion, and sometimes if the builder is unwilling to negotiate on the price, we drop our commisson to get the bargain for the customer (within reason, and never lower than our 3%).
Ringledman - if you are encountering any situation other than the ones TRMA and I have outlined then you are choosing the wrong agencies.
We offer a free due diligence report for any customer who requests it. It is done on the builder, and we can provide on ourselves too if requested. The due diligence report will confirm if the builder is financially sound, has oustanding tax bills, has the correct building permits, has any outstanding legal claims against him etc. This give peace of mind to anyone concerned. The problem with parador et al is that because of their brand name people assumed that they were safe - big offices with fancy furniture is no indication of the long term security of the company. And it was parador et al who were the ones charging 20%+ not the rest of us.
As you rightly say,
The agents that will survive this downturn are the open and transparent ones.
This is definitely true, and when looking for an agent, one who is totally honest with you is the best one. Any company not prepared to provide due diligence reports is one you should avoid.
Finally, I really believe that buying off plan without visiting an area is a bad move. At the end of the day the job of an EA is to sell, and whilst many of us are realistic about things, we of course will highlight the positives and downplay negatives. This is not to say we are not beig honest, but you have to accept that we are not going to slate a property we are selling. For example there are areas I personally would not like to buy in, because they are not to my taste, but I'm hardly going to tell a client tht, if they sem really keen on the area?? its like insulting their choice. It is not our job to babysit you - you need to be clear about what you are buying and if it suits you. I cannot know if an apartment will be perfect for you after a few phone conversations and emails. I will try to meet all your criteria, i will give you fair and honest advice, I will not pretend that the complex is 10 min walk to the beach if it is 10 drive! BUT, even after I give good advice it may not be suitable for you. Don't blame the agent if you bought in an area you end up not liking, cos you didn't visit it! We cannot know each clients personal tastes exactly! We rely on what you tell us.
So if you are buying overseas, visit the area. either go independently or book an inspection trip with the company. but if you buy without viewing the area, or conducting due diligence, then some responsibility has to lie with you, and not always be the fault of the agent.