This article was written in collaboration with the Council for Estate Agencies. All views expressed are the independent opinion of DollarsAndSense.sg
When it comes to buying, selling, or renting a property, many buyers, sellers, landlords, and tenants in Singapore will typically engage the services of a property agent. A property agent helps facilitate your property transaction, such as advising you on the right price to ask for your property, processing paperwork, and coordinating other legal requirements that might be needed in order to complete a transaction.
Most of us might know that property agents do not receive a fixed monthly salary. Rather, they are remunerated by the clients who appoint them whenever a transaction is successful. This could apply to buying, selling or renting a property.
It’s important to note that it’s illegal for a property agent to be taking commission from both parties (i.e. buyer and seller, tenant and landlord) of a transaction. Doing so would be considered as dual representation and is against the law.
How Much Commission Should I Be Paying?
In a poll of 162 respondents that DollarsAndSense conducted last year, we found out that only 44% of respondents knew that commission rates for property agents are negotiable – with the remaining 56% thinking that it was fixed or admitting that they didn’t know.
As highlighted by the Council for Estate Agencies (CEA), there are no fixed commission rates for property agents in Singapore. Neither does CEA, nor any other government authority, provide commission guidelines to refer to. Consumers are free to negotiate and agree with their agents on the commission quantum and commission fee, basing this on what they deem is commensurate with the scope of work and services the agent will provide for the transaction.
The fact is that no two properties are ever the same, and even if they are, the owners who own the properties may be asking for a different price. Having negotiable commission rates allow both consumers and agents to have the leeway to decide what is a fair amount to pay for a property transaction.
In addition, be fair to your agent. Honour and pay the agreed commission after he facilitates a successful property transaction for you. Remember to pay the commission to your agent’s property agency, and not to your agent, after a transaction has been completed.
Here are 4 factors to consider when deciding on the commission rate.
# 1 Difficulty Of Selling A Property
Not all properties are built equal. Some properties are just naturally going to be more difficult to sell than others. An older HDB flat, which is a distance away from the nearest MRT station, is typically going to be more challenging to sell compared to a newer HDB flat situated in a prime location.
While the older HDB flat may be priced lower (e.g. $300,000) than the newer flat (e.g. $600,000), it could be harder to sell the older flat. Now, if commission rates were to be equal for both flats (e.g. 1.5%), facilitating the sale of the older flat will earn the property agent a lower commission ($4,500) compared to the newer flat ($9,000).
When determining how much commission you should be paying, have a clear, realistic idea on just how difficult (or easy) it will be to sell your property. Is your property a high-floor, corner unit that many people would want, or is it a ground-floor unit that many buyers are not too keen on? This will help you determine just how much your commission rate should be for the effort put in by the agent to facilitate the sale of your flat.
# 2 How Quickly Do You Want To Sell Your Flat?
How quickly you want to sell your property may also have a bearing on the amount of commission that you are willing to pay your agent. If you are moving out of the country and are in a rush to sell your existing property as soon as possible, giving a higher commission rate in addition to a lower asking price is likely to help the agents you appoint sell your property a lot quicker.
On the other hand, if you are not in a rush to sell your property and do not need your property agents to be advertising aggressively, you can consider negotiating to pay a lower commission.
# 3 Your Asking Price
With all things being equal, a property with a lower asking price is likely to be an easier sell compared to a similar property with a higher asking price.
If your neighbours are selling their apartment for $1 million and you are asking for $1.1 million, your agent is going to have his/her work cut out for him/her. This may mean having to search harder for more buyers, more viewings required and maybe a longer time and effort required for marketing. In such a situation, your agent may ask for a higher commission rate.
# 4 Added Value Proposition That Your Agent Can Offer
If your property agent is asking for a higher commission compared to others, you should ask them for the reasons behind the higher price of their services.
Some agents are naturally better at marketing and selling a house. Others may have a wider network to tap on or are more experienced when it comes to selling specific types of properties in a certain location. Some agents may employ innovative marketing strategies, such producing marketing videos that can be shared on social media platforms like Facebook to get wider reach.
These additional services and expertise are ultimately created (at a cost to the agent) to help you get the best possible price. Knowing the value proposition that they are able to offer their clients, these agents could ask for a higher commission.
Always Ensure That You have A Written Agreement With An Agent Before Any Work Begins
Instead of just relying on a verbal agreement, you should always strive to have a written agreement with the property agent you intend to appoint to help you with the property transaction. This applies whether you are buying, selling, renting as a tenant, or renting out as a landlord.
A written agreement protects you and the agent from any unnecessary misunderstanding that could easily be prevented. It will state the amount of commission agreed upon, if any, and whether GST is payable upon the commission.
CEA has a list of prescribed agency agreements that you can download and use. Whether you are a seller, buyer, landlord or tenant, and whether you want to have an exclusive or non-exclusive arrangement, you can simply download the relevant form that you need and have it completed with your appointed agent.
All property agents in Singapore must be registered with CEA through their respective property agencies. Find out more about engaging a property agent here.