This article was written in collaboration with the Council for Estate Agencies. All views expressed are the independent opinion of DollarsAndSense.sg
While it’s true that property owners, buyers and tenants can buy, sell or rent a property on their own, many still prefer engaging the services of a property agent. This is because for most of us, property transaction procedures are not only unfamiliar, but can also be complicated and time-consuming.
There are some key points to discuss with your potential property agents and in this article, we highlight 5 important things you should bring up.
The most important thing to do before even appointing a property agent is to check that he/she is registered with the Council for Estate Agencies (CEA). It’s an offence for individuals to carry out estate agency work without a valid registration so check CEA’s Public Register to ensure that your agent is listed.
# 1 Commission
How much commission you should pay is likely to be one of the first questions on your mind.
Commission rates for property agents are negotiable. There is no government regulated or fixed rate, but not all consumers know this.
In a recent poll of 162 people conducted by DollarsAndSense, we found that only 44% of respondents in Singapore knew that commission rates for property agents were negotiable – with the remaining 56% of respondents thinking that they were fixed, or admitted they didn’t know.
Before you start bargaining or trying to find an agent with the lowest commission, you should think about the outcome you want and what you’re hoping your agent will do to help you achieve that outcome.
For example, if you are selling your house, think about whether your home will be easy to sell.
If similar-sized flats around your estate are selling at $500,000 while you are asking for at least $550,000, then the agents whom you engage may find this challenging, and may expect a higher commission for the additional time and effort that they expect to spend marketing your unit to prospective buyers. Or if you’re in a hurry to sell and want multiple agents to actively market your unit, then paying a higher commission rate might make sense.
On the flipside, if you’re looking to sell your home for $450,000 while the current market pricing is closer to $500,000, then you (and your agent) are likely to find it easier to find a buyer. In this case, agents may be more willing to accept a lower commission, knowing that finding a buyer will be easy.
The same logic applies to landlords and tenants. If you’re a landlord and your place is challenging to be rented out, e.g. it’s located far from amenities or you are looking at renting out at a premium, then you might want to offer a higher commission to your agent. Similarly, if you are a tenant and have many requirements that are difficult to fulfil, you might want to think about paying a higher commission rate to your agent as it would take more work to find your perfect rental home.
Hence, discuss the scope of work with your agent and agree on a fair commission rate that is commensurate with the amount of work needed to facilitate this transaction. Remember to do this before the agent starts work and honour the deal when the transaction is completed.
Read more about what you need to know about agents’ commission in this article from CEA.
# 2 Exclusive or non-exclusive arrangement
When engaging a property agent, you need to decide if you want an exclusive or non-exclusive arrangement.
An exclusive arrangement is when your property agent and you mutually agree for the agent to be the sole representative/property agent handling your property transaction for a stipulated period.
A non-exclusive arrangement means that you engage many agents to help with your property transaction.
Either option presents its own pros and cons. If you are engaging multiple agents, you have more people helping you, which is (theoretically) better. However, it’s also worth noting that because none of these agents have exclusivity, it’s possible that you may not be high on any of these agents’ priority lists. Their efforts might also overlap, thus making it harder for you to manage.
On the other hand, an agent who is your sole representative is likely to be in a stronger position to negotiate with other agents (co-broke) or parties in the transaction. You also won’t have to manage schedules with multiple agents.
# 3 Responsibilities of your agents
It’s important that you understand the responsibilities your agents have when you engage them.
Besides providing professional service and advice, your property agent should be knowledgeable and act in your interest. He should only represent you in a property transaction (i.e. he cannot be appointed by both seller and buyer, or tenant and landlord for the same transaction).Dual representation will compromise your interests and is an offence under the Estate Agents Act.
In the event that the other party in the transaction did not engage a property agent, your agent can help them with the paperwork as long as he has obtained your consent and it is clear to all parties that he is not acting for the other party. In addition, he should not collect a fee from the other party for helping them out.
# 4 Conflict of interest situations
In a property transaction, it is possible for conflict of interest situations to arise for a property agent.
For example, you have engaged an agent to help you sell your property. He may share this with his sibling, who may later make an offer for the property. This becomes a conflict of interest situation for the agent, since the prospective buyer is a family member.
Other conflict of interest situations include scenarios when your agent is receiving a referral fee from other parties (e.g. bank, renovation companies) or if your agent is collecting a co-broke commission from the other party’s agent.
If there is any conflict of interest, you should expect your agent to disclose this to you. You can find out more on what constitutes a conflict of interest situation here.
# 5 Important documents – The Estate Agency Agreement and Customer’s Particulars Form
Rather than rely on verbal agreements, which sometimes happens when consumers are engaging property agents who are their family members or close friends, always make sure that whatever you have discussed and agreed upon with your agent is documented in the estate agency agreement, and signed by the both of you.
Having this agreement helps prevent any unnecessary misunderstanding.
If your agent does not bring up the estate agency agreement prior to you appointing him, ask him about it.
While a good agent should take the time to explain the content within the estate agency agreement to his client, it’s also your obligation as a consumer to also ensure that you understand and agree with the content included in the agreement, before signing off on it.
If you are in doubt on any of the details within the agreement, you should clarify with your agent.
If needed, you can use one of the prescribed estate agency forms from CEA, which is available for anyone to download and use.
You will also be asked by your agent to sign a Customer’s Particulars Form. This compulsory form is one of the measures agents must take to prevent money laundering and to counter terrorism financing in Singapore. It is important that you fill the form, sign, and hand it to your property agent.
Protect yourself by being a well-informed consumer
By being a well-informed consumer, you can ensure that your property transaction has a better chance of achieving the ideal outcome that you want.
Being well-informed also helps protect the relationship that you have with your appointed agent. This goes a long way in ensuring that you enjoy a pleasant experience as you buy, sell, or rent a property with the help of an agent.
You can also find out more about how you can be a happy consumer when working with agents on the Happy Consumer page on the CEA website.