Property agent’s priority is to get the best price

Source : Straits Times – 14 Oct 2009

IT IS good to examine why the ‘one agent representing buyer and seller’ situation happens only in the HDB resale market and not the private property market.

The difference between an HDB resale and private property is that in the latter, once the parties agree on the selling price, the sale is concluded after the legal searches and transfer of titles are carried out. In an HDB resale, the agreed price is not conclusive. The HDB needs to give consent. Obviously, there is more administrative work to do after the agreement on price is inked.

However, administrative work is independent of price. Therefore, when the agent wants to charge an administrative fee that is pegged to a percentage of the agreed price, it gives a wrong impression that he is being rewarded for getting the best price.

I often hear property agents say that HDB resale flats are lower in price compared with private properties, and therefore deserve a 3 per cent commission for the fee to be sizeable to co-broke. If a private property sells for $1 million, the commission of 2 per cent is $20,000, and in a co-broking situation, each agent gets $10,000. For an HDB resale flat selling for $300,000, a 2 per cent commission comes up to $6,000 and is unattractive for co-broking.

However, I must reiterate that a property agent’s fundamental duty is to get the best price for the party he represents. Earning a fee for other aspects of work like running advertisements, walking potential clients and fixing appointments are duties expected of a property agent, but they come after his fundamental duty to get the best price.

Before the authorities implement any control over the issue, I suggest that if a buyer is interested to make an offer to the seller, he can do so with or without the agent present. This is so as not to lose out because the seller’s agent insists on the buyer engaging his administrative services. The agreement between the seller and his agent should have provided that the the latter be entitled to his commission even if it was the seller who closed the deal.

Patrick Sio