No More Fixed 2%/1% Commission For Sellers/buyers!

[zirhk3355 1]

Fees freed, who gains??

Consumers reluctant to pay more, but agents want higher fees for premium service

Wednesday • August 6, 2008

Kelvin Chow and Neo Chai Chin

kelvinc@mediacorp.com.sg

IT WAS the centre of controversy two years ago, as HDB homebuyers raged about paying a 1-per-cent commission to housing agents — who were, at the same time, taking a 2-per-cent cut from the seller — just for submitting simple documents to the housing authorities.

Come Sept 25, this percentage commission recommended by the Institute of Estate Agents (IEA) will be scrapped. Individual agents and agencies will decide how much to earn off home sellers and buyers.

But will consumers be the real gainers?

The Competition Commission of Singapore (CCS) told the IEA on June 25 that the fee guidelines — based on 1974 recommended commission rates of 2 per cent for sellers and 1 per cent for buyers — restricted competition.

“Customers should exercise their right to negotiate fees and terms with estate agents,” said CCS in a statement.

However, real estate agencies told Today that lifting the guidelines may not mean lower fees — in fact, they expect more room to offer enhanced services to buyers and sellers willing to pay more.

Mr Chandran Pillay, senior vice-president of Global Real Estate Realty, said: “We intend topackage a premium service for customers who prefer a higher standard of service, to justify a higher fee collected.”

Agents would now be appropriately rewarded, said Dennis Wee Group director Chris Koh: “If they want a higher fee, they will have to raise their professionalism.”

:The CCS urges agencies to publish their fees and provide a breakdown of prices, to help consumers shopping around for an agent.

:Still, there is a risk of some agents jacking up prices unscrupulously. “Those with exclusive rights to a property may hike fees,” said :Mr Koh Hock Seng, division director of Roof Real Estate Group, who felt there should be guidelines to prevent overcharging.

:Others could also find a willing buyer and seller before demanding high fees – and with a deal almost sealed, parties would be reluctant to back out, suggested civil servant J Arumugam, 35.

:Recognising the possible pitfalls, the Consumers’ Association of Singapore (Case) urged buyer and sellers not to accept agents who insist on the old fee practices and to “avoid exclusivity clauses”. The watchdog also urged agents to be transparent in listing “all fees clearly in a contractual document”.

HD: More bang for the buck?

But, whether higher fees are backed by agents’ better service or sly tactics, sellers and buyers seem reluctant to pay more than the current rates – as they do not see what further value these middlemen can add to a transaction.

Mr Arumugam, who sold his flat two years ago to buy a house, said: “Agents don’t do anything more than taking the cutomer to see the house.”

Mr Chandran said the liberalised commission system could motivate agents to seek out a bigger pool of sellers, so that they can charge a prospective buyer more for taking him or her to see “10 to 20” more homes than they currently would.

But, sellers and buyers looking pay the cheapest fees will also have choices available.

Already, some agents told TODAY, they exercise discretion in charging clients. Said one with 20 years’ experience: “:Sometimes agents may charge below 1 per cent just to get the deal through and move on.”

What could work in consumers’ favour: Market conditions. :Mr G Lim, 41, for example, paid his agent less than $1,000 to buy a HDB flat in 1998. “When markets are bad, agents are prepared to negotiate. In a good market, sometimes agents are not even interested to do your business,” said Mr Lim, who is in the financial industry.

:With the fee structure freed up, who will have the consumer’s back? As Mr Chandran admitted, it would be “difficult to determine whether the consumer will be overcharged for the services offered”.

While the onus will be on the consumer shop around carefully before settling on an agent, those who think they have been overcharged can :seek recourse.

:For example, if an agent has under-reported a house’s floor area, the client can make claims through the agent’s professional indemnity insurers, said PropNex chief executive Mohamed Ismail.: Conversely, if the customer refuses to pay the commission agreed on, the agent can “seek his own recourse with the customer”.

:Consumers can also approach Case, which last year received 1,055 complaints about disputes between property agents and their clients, most of them concerning “unsatisfactory services”, said executive director Seah Seng Choon.

What of that perennial bone of contention – agents receiving dual commission?

Case agreed that agents should not collect fees from buyers and sellers, as it would breach their duties to both parties. It also urged agencies to put a stop to “questionable practices” such as preventing potential buyers from viewing a property unless commission is paid.

But some homebuyers, like Mr Phong Kah Ho, 34, are optimistic the consequences of the freed fee structure could resolve the issue. “If there’s enough competition, I think the commission paid by the buyer could go down to zero,” said the engineer.

Copyright MediaCorp Press Ltd. All rights reserved.

http://www.todayonline.com/articles/269048.asp

Edited August 6, 2008 by zirhk3355

[hihihi 0]

I feel abit amused and surprised by the news.

First impression is, with this kind of high demand market now, the commision will just going to go up and not come down. So yet another price hike for commoners, again. And the news is quite badly timed. Despite the interviewed pple's positive reaction in the news, u always have to intepret to its direct opposite reaction.

[zirhk3355 1]

Ya its quite a farce and more should still be done. Agencies must be enforce to elaborate their fees upfront to the client and CCS must monitor this to ensure there is no price cartel.

So many industries also do not have guidelined fees but they also operate in cartel, which is even harder to regulate.

[papbestdad 0]

Singaporean are forever unsatisfied with whatever decision not being "decided" by themselves.

[zirhk3355 1]

Another interesting viewpoint fron Straits Times...

--------------------------

Aug 6, 2008

Property fee guidelines must go, says watchdog

Move could foster competition and a price war among real estate agents

By Jessica Cheam

HOME buyers and sellers will be able to haggle over the commission they pay property agents after a guideline on fees is axed next month.

The Competition Commission of Singapore (CCS) said yesterday that the guidelines adopted by the Institute of Estate Agents (IEA) in 1999 are uncompetitive and must go.

The surprise move could spark a price war among agents, say some experts.

Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, believes buyers and sellers will be the winners: 'Consumers should not accept agents who are harping on the old fee practices and should be free to bargain.'

At present, sellers of Housing Board flats generally pay the agent 2 per cent of the purchase price while the buyer pays 1 per cent. In private property transactions, only the seller pays 2 per cent.

The IEA guidelines have become standard practice, a point addressed by the competition watchdog yesterday.

It said that while the guidelines are not binding, 'they provide a focal point for prices to converge. This will... dampen competition and facilitate price coordination.'

It also noted that they are stated as a 'minimum fee', which discourages any price competition below that rate.

'Agents should not be constrained to offer the same price,' said the CCS, which told the IEA on June 25 that the guidelines 'are likely to infringe the Competition Act'.

IEA president Jeff Foo said the institute, which represents about 1,600 agents, will axe the guidelines by Sept 25.

Industry leaders had mixed reactions to yesterday's news. Some say the impact will be minimal as agencies will keep the status quo but other experts forecast an agents' price war, especially during market downturns.

'This throws open negotiations between agents and sellers or buyers. Market conditions will determine who has the upper hand,' said Mr Colin Tan of property firm Chesterton International.

In bad times, agencies could start under-cutting each other, or conversely, agents could demand higher commissions from desperate sellers and buyers, said Mr Tan.

Mr Chandran Pillay, senior vice-president of Global Real Estate Services, said smaller agencies like his cannot lower fees too much as they are already quite low and the costs of selling a property are high.

House-hunter Tania Goh, 24, welcomed the room for negotiation but she was concerned about agents who 'can abuse this system when they know a buyer strongly desires a property'.

PropNex chief executive Mohamed Ismail said the removal of guidelines 'may not be a bad thing' if agents up their service quality to justify the commission they get. His agency will use the IEA fee guidelines as the basis for negotiations with its clients.

Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, said the 2 per cent fee is lower than the 6 per cent norm in the US, for example.

IEA's Mr Foo said consumers should get written agreements on agents' fees before accepting any services.

jcheam@sph.com.sg

Copyright © 2007 Singapore Press Holdings. All rights reserved. Privacy Statement & Condition of Access

http://www.straitstimes.com/Free/Story/STIStory_264971.html

[papbestdad 0]

Can never be pleased : Singaporean.

[zirhk3355 1]

I dun understand what you are driving at with your two posts; care to elaborate?

[hihihi 0]

Can never be pleased : Singaporean.

True. Ministers are also singaporeans too, isn't so? Vicious cycle.

[papbestdad 0]

I dun understand what you are driving at with your two posts; care to elaborate?

First , consumer wants to remove the guidelines, now guidelines removed,

they think of other negative things to say/think about again.

[mwerkz 0]

i think dis move will basically lead to higher commission from seller for flats with high cov n higher commission from buyers for flats with low cov.

depends on who looks more desperate. so lucky for me? my hm with low cov only 1% still? but i oso read like de move where agent cannot represent both buyer n seller. i think this is a good move. cos previously sellers avoid me like a plague when dey know i have an agent

[JCase 0]

First , consumer wants to remove the guidelines, now guidelines removed,

they think of other negative things to say/think about again.

People just want consistent guidelines to govern the selling of properties. Why is this cynical or unreasonable? If I am buying a property, why should I pay a commission? The burden of this should logically fall on the seller as it's the seller who has to the property marketed. The buyer basically is responding to an ad. Does not make any sense.

So you would be completely positive if you have to pay an agent 1% to buy a place that he/she is contractually obligated to sell on behalf of the seller?

[zirhk3355 1]

i think dis move will basically lead to higher commission from seller for flats with high cov n higher commission from buyers for flats with low cov.

depends on who looks more desperate. so lucky for me? my hm with low cov only 1% still? but i oso read like de move where agent cannot represent both buyer n seller. i think this is a good move. cos previously sellers avoid me like a plague when dey know i have an agent

I think a more probable situation is that when an agent is marketing a very good property, s/he will ask for sky-high comm from the buyer and turn away all agents. If this is not regulated, it can turn chaos.

I also agree with the move to stop agents from representing both sides; once I questioned an agent on his fidicary duties when he collects fees from both seller/buyer, he said he will stand on middle ground and not side anyone. I said if I am paying you a fee to represent me and you want to stand on middle ground, I will sack you on the spot; you are supposed to represent me and act in MY best interest! Otherwise I employ you as my agent for what...?

Only in this industry can such nonsensical practice be condoned...

People just want consistent guidelines to govern the selling of properties. Why is this cynical or unreasonable? If I am buying a property, why should I pay a commission? The burden of this should logically fall on the seller as it's the seller who has to the property marketed. The buyer basically is responding to an ad. Does not make any sense.

So you would be completely positive if you have to pay an agent 1% to buy a place that he/she is contractually obligated to sell on behalf of the seller?

If buyer is to pay the same agent who is also representing the seller, then no, as I explained above.

But if an agent wants to represent you as a buyer solely to act on your behalf for the transaction (because you are not sure about real estate and need help), then of course you must pay a fee even though you are a buyer. The agent's comm is not paid just for marketing purpose, but also to assist you (as buyer) to act in your best interest in terms of legalities, due diligence, negotiation, etc.

[kaylinpickles 1]

seriously, i hv mixed feelings abt this. at 1st when i heard it i was REALLY happy. then again it may not be gd news afterall...since in future the property agencies get to set their own rates, i wonder will it go higher, and then all the other agencies follow suit? what i don't understand is, one of this agency boss they interviewed said when the market is bad, home owners are willing to pay more commission than when the market is gd. how come leh? i tot shd b the other way round?

anyway is it true that last time, the fees were negotiable all along? i'm curious to know if i try to negotiate the fees with them, say, the max i will pay is $3K...will they not work as hard? perhaps this is the time to engage alot of agents, instead of an exclusive one. haha. or mayb really fated to sell the flat myself.

[derrick_ng2001 0]

seriously, i hv mixed feelings abt this. at 1st when i heard it i was REALLY happy. then again it may not be gd news afterall...since in future the property agencies get to set their own rates, i wonder will it go higher, and then all the other agencies follow suit? what i don't understand is, one of this agency boss they interviewed said when the market is bad, home owners are willing to pay more commission than when the market is gd. how come leh? i tot shd b the other way round?

anyway is it true that last time, the fees were negotiable all along? i'm curious to know if i try to negotiate the fees with them, say, the max i will pay is $3K...will they not work as hard? perhaps this is the time to engage alot of agents, instead of an exclusive one. haha. or mayb really fated to sell the flat myself.

When you sell house, you hope that agent does not collect commission from you and collect all commission from buyer so that you can keep all sales proceed. But when you become buyer, you feel that you should not pay commission since you glance thru newspaper yourself and make enquiries yourself. Hence you should not pay even 1% comm. and let alone another 2% for seller’s agent commission. So with the above, please advice who will the agent get fund from to invest in advertisement in order to market your property to its maximum value. And where will you see the advertisement to call, enquire and buy your dream home then?

So do you think agent’s job is easy to survive in between the above kind buyer and seller? When agent does not collect from seller, seller says he is a good agent and buyer will say he is a con-man because he collects too much commission unnecessarily. But when he collects commission from seller, seller wants to choose agent who do not collect commission from him. So what do you suggest agent to do? What do you think if agent sells your house without collecting commission from you but when you buy another house from him, he collects 3% commission from you? Do you still regard him as a good agent? Trust me, if agent does not collect fee from you when you sell your house, you will never buy any property from him that is marketed by him. In all the forums, everyone is commenting only from one point of view, either as seller or buyer. Try to discuss in a more democratic way as seller and buyer, you will see different point of view. Or better still, put yourself in the shoe of agent.

Since IEA sets the commission guideline, they had did a thorough calculation on how much is it justifiable to collect from each party base on amount of time and money invested. The 1% commission payable is for the documentation, time, transport, telephone, salary for agent. Seller pay additional 1% is because of advertisement and time spent on market study. Agent needs to pay for Newspaper, internet, mobile, car installment, phone, petrol, subscription fee of certain channel of marketing tools, flyers, flyers distributor, etc…. And please take into consideration that they are all doing it WITHOUT a basic pay. If agent job is so easy, do you think you have the courage to forsake your current job with high basic pay and become an agent and start pumping in the ABOVE COST without basic pay? Since agent takes the risk, like investing in share, they should get reasonable return on the risk they take. Moreover, this month they may clinch 3 deals giving them a nett commission of S$15000 after splitting with the company, they may be closing nothing for the next two months which means they make approximately S$5000/mth to COVER THE ABOVE COST. If you are an employed worker earning 5000/mth, what do you spend it for compared to agents?

I only feel that agent should remain to collect commission as per IEA guideline and consumer should still pay as per guideline base on the below conditions:-

1) If an agent collects 2% from seller, they should not deal with direct buyer so as to stand on one side and fight for the best price for seller unless agree by both seller and buyer.

2) If agent is acting for buyer with 1% commission, he should not promote property he is selling unless agreed by both buyer and seller.

3) If agent sold the property he is marketing to direct buyer, he should only collect commission from the seller.

4) Try to avoid agents from same company who act for seller and buyer as they may be in a team, which is a norm nowadays, and making a show.

5) Always be around during negotiation and listen to what your representing agent say in the negotiation when the opposition agent is from the same agency or if the same agent is representing both seller and buyer.

The commission guideline should not be disposed but to reinforce the above mention in 1-5 in conjunction with the commission guideline so as to protect the benefits for both buyer and seller. Because by disposing the commission guideline, it will only bring the whole market into chao. Like now, buyer is paying unreasonable commission. Beware seller, you will one day become buyer.

Seller who meets up agents who do not collect commission or collect less commission from you should SHUT them OUT straight away because these are agent who do not have principle and who do not have any professionalism. Please think about it, if the agent is capable of providing the best quality service, why does he need to lower down his commission? And after he lower down his commission, for instance, S$ 5000 become S$2500, how much will he spend to market your property. If you still dream that this agent is cheap and will find the best price for you, then dream on.

Logically, just treat yourself as agent and ask yourself what you will do with S$5000 of marketing fund as well as S$2500 of marketing fund. More often then not, you will let go the property as fast as possible so as to minimize your cost because maximum selling price is no longer your priority as the property does not belong to you. Alternatively, you will not co-broke with other agents even if the price is better for seller because you will want to seal the deal with direct buyer so as to earn the 1% commission from buyer even if the price is lower than what is offered in the cobroke. End of the day, seller who looks for cheap agent will lose more than the 1% or 2% in the deal. For Instance a deal of S$300000 property, 2% is S$6000, are you going to lose 10-15k just because of S$6000?

Of course, I have to agree that there are a lot of bad eggs in the property industries. Even as a property agent, I do encounter this kind of agents who show no professionalism in their work. If seller had signed exclusive with this kind of agents, please call me and I will try my best to be of assistance to you wherever possible. Don’t worry, you need not let me sell your property after that. It will be a favour to you.

Concluding the above, I trust that all the buyer and seller here are more than willing to pay the 2% and 1 % as long you get a fair deal end of the day because for every extra S$1000 you earn or save, you are only paying extra S$10-S$20 to agent. And Buyer and seller should choose agent base on the abovementioned 1-5 because the above will safeguard your interest more than the lift of commission scheme.

As for agents, I presume that the guideline will not be lifted for nothing. So do go for your CEHA if you do not have one. Think of what will happen once market become chaotic. Someone will step out and become “Mr Nice Guy” and dig into your pocket. If he manage to dig 1K per year from each agent, he will be making MILLIONS of dollar each year just sitting in the office and issue papers.

I hope I did not offend any Buyer/Seller/Agent in my above penny of thought. Should any buyer or seller need my assistance, please do not hesitate to contact me at <edited>. I will be more than willing to be of assistance to you.

Cheers.

zirhk3355: We welcome your comments to defend the agents' industry, but as ethical as you are, I believe you should refrain from advertising for yourself.

Edited September 26, 2008 by zirhk3355

[summerholiday 2]

on a low property market, some might totally for a few months without closing a deal..

they r takin a high risk jobs this is true tat come with high returns or zero return, jus lik insurance agent.. car agents..

we can do wuth or without them, but to mak our life easily, we might need their assistance..

i had a experience losing up a chance of buying one unit suspect due to commssion reasons as i brought a agent to help deal with the seller agent although i did call up the seller agent myself.

noticed that when u call up newspaper spoke to the seller agent, they automatically wan u to let them be ur agent to get e 1% comm.