Here’s What You Should and Should Not Be Paying Your Property Agent in Singapore
No one likes to be told that their job can be done by anyone. Whenever a Catholic priest counsels people about married life or raising children, the common criticism they hear is that priests have no right to comment. After all, they’re supposed to be celibate. That means they’ve never been married or had kids, so what would they know?
When I recently discussed how to sell your HDB flat without the help of a property agent, I knew that I would get a lot of criticism from agents who felt I was not taking their job seriously. After all, I was just a writer for a personal finance website. What did I know?
Well, I know how to read and do research, and as a result, I’d like to think I know what the average Singaporean should and should not be paying your property agent.
Okay, first… what is a Property Agent expected to do?
All licensed property agents should provide at least the following services:
- Advising and helping you negotiate the price
- Advising on the property purchase or sale procedures
- Advising on any restrictions regarding obtaining a home loan, as well as all the various fees payable
- Assisting you in your property search or sale by arranging and coordinating viewings.
- Looks out for all potential risks, such as ensuring that there is a final inspection of the property before you pay the option fee
Hmmm… is that all? I thought property agents did more than that?
Many property agents bring with them extensive knowledge and experience in the market. They may also offer to help you with the following services:
- Publicity and marketing of your property online and offline, conducting open houses for property sales
- Coordinating appointments with lawyers, bankers and HDB resale officers
- Preparing the required documents including the Option to Purchase, resale applications, inventory list, letter of intent and tenancy agreements
- Conducting a comparative market analysis (CMA) to determine the value of the property
However, do note that these services, and many others they may offer to help you with, are not necessarily required by a property agent to do. I’m not saying that you shouldn’t be paying them to do it, but some of these procedures aren’t as complicated as they first appear. By taking on some of these responsibilities, you may be able to negotiate a lower commission rate with your property agent.
Wait… you can negotiate the commission rate?
It may seem extremely convenient to just sit back and assume that your property agent will do all the legwork for you. After all, that’s why you hired them and are paying the market rate of 2% of the agreed price.
But speaking of the market rate, there’s no hard and fast rule that says you must pay 2% of the agreed price as commission. In fact, by being clear with your property agent what you need them to do, and what you’re willing to do on your own, you should be able to negotiate exactly how much of the agreed property price forms the agent’s commission.
But be careful – just because an agent claims that he can sell your property for a higher price, or is willing to work for a lower commission, doesn’t mean that they’re necessarily the agent you should go with. Sure, it may seem like they’ll help you earn more, but you might end up with an agent that doesn’t serve you to the best of their ability.
So, what should you avoid?
But there’s a danger to just presuming that your property agent has your best interests in mind. After all, a property agent may conveniently have a few deals on the side. For example, does he have a “friend at the bank” who can get you a “special” home loan rate? He probably just wants to earn the referral fee from that “friend”. It is not your property agent’s responsibility to provide you with the best home loan, especially not when home loan comparison sites readily provide that information.
You should also avoid hiring multiple agents in order to help you sell your property. While some sellers might think that this practice will help them make a quicker sale, competition between agents may actually lead to undercutting your selling price.
What about unethical or illegal practices by property agents?
In any client-agent relationship, there’s a measure of trust involved. Such trust can be easily taken advantage of – so it’s important to recognise what is considered unethical practice, and what is outright illegal.
For example, property agents should not provide extra benefits such as gifts and cash vouchers in order to earn your business. In the first place, the commissions of property agents are not fixed – if anything, agents should offer to lower their commissions in order to earn your business. There is no good reason why any agent would feel the need to provide freebies of any kind, but still insists on the 2% commission fee. Trying to offer you relatively cheap benefits in order to earn a hefty commission is frowned upon.
As for outright illegal practices, property agents are no longer allowed to represent both buyer and seller, so as to prevent any conflict of interest. They are also not allowed to handle any transaction money on your behalf, nor are they allowed to provide you with a cash advance or introduce you to moneylenders in order to help you with your downpayment. These practices should be reported.
So… is 2% a fair price for a property agent’s commission?
I don’t want a horde of property agents to stalk me and threaten me with more words. Ultimately, the decision is yours to make – as the property seller or buyer, you need to decide what a fair commission rate is. Just remember that it is negotiable, and that there are some processes which you can do on your own, and don’t need to rely on your agent for.
What do you think is a fair commission rate for property agents? Share your thoughts with us.