Removal of property fee guidelines unlikely to have deep impact

Source : Channel NewsAsia - 6 Aug 2008

Market players said on Wednesday that the move to scrap guidelines on property agents’ fees by September 25 is unlikely to leave a deep impact on the real estate sector. But they warned against rogue agents who might try to cash in on the change in rules.

The Competition Commission of Singapore (CCS) ruled on Tuesday that the fee guidelines adopted by the Institute of Estate Agents (IEA) should be removed as they are uncompetitive. Under the current guidelines, property agents stand to pocket a commission of 2 per cent of the transacted price.

With the removal of the guidelines, buyers and sellers will be free to negotiate the fee payable to their agents.

Real estate agencies are generally supportive of the move, but they are concerned that the lack of fee guidelines could trigger more rogue practices.

Chris Koh, director of Dennis Wee Group, said: “If the owner is not aware of what the market price of his property is, then he may fall into a trap where the rogue agent says, ‘Ok, you want a million dollars, that’s what you said you want. I will get you that S$1 million, but if I sell your property at S$1.2 million, then that S$200,000 is for me to keep since there is no guideline that it must be a percentage’.”

Another real estate company, Propnex, warned against agents who offer unnecessary services just to quote a higher commission.

Without any fee guidelines, market players said it is down to the agencies to set their own commission structure. Propnex said consumers must assess their agents based on their commitment, track record and knowledge of the market.

Some industry players said the removal of the commission guidelines will not spark a price war because the cost of marketing a property has nearly doubled in the past ten years, and it will not be sustainable for agents to start under-cutting each other.

On average, about 10 to 20 per cent of the agent’s commission goes into marketing efforts, such as taking out advertisements to promote a property. Paying a lower commission does not necessarily mean a better deal as agents may not put in as much effort to sell a property.

Some Singaporeans prefer to sell their properties on their own. Rosanah Mon helped her mother sell her three-room flat at Jalan Bukit Merah for S$230,000, saving over S$2,000 in the process.

“I don’t see the necessity (to get a property agent), if you know the procedures well and you follow the guidelines,” she said.

In fact, the Housing and Development Board (HDB) said it has seen an increase in the number of such transactions - rising from 5.5 per cent of total resale transactions in 1998 to about 8 per cent now.

To boost greater understanding of the sales procedures, HDB holds monthly resale seminars, with the next one scheduled on September 6. More information is available online at www.hdb.gov.sg.