HOW much should you pay your property agent?
This has been the talk of the town this week, and no surprise, given how home ownership issues are tied so closely to the hearts of Singaporeans.
When the Institute of Estate Agents (IEA) first announced the Compeition Commission of Singapore's (CCS) request to abolish a decade-old fee struture at a press conference: the initial mood all around was: "no biggie".
IEA's guidelines were non-binding anyway, said agency bosses. It was never compulsory, so its abolishment should have minimal impact. Many agencies, such as ERA, PropNex, C&H Realty told The Straits Times they will adopt IEA's fee recommendations as their own agency guidelines anyway so the status quo is maintained.
But as the industry digests the news, it seems that the removal of these guidelines will have far-reaching effects.
Already, the CCS and consumer watchdog Consumer Association of Singapore (Case) has issued statements to alert consumers to their rights.
Consumers should not accept agents "that are harping on the old fee practices" and should be free to bargain, Case said. It encouraged consumers to report any evidence of collusion on the part of the agencies, and advised consumers not to give agents exclusivity to sell their houses.
Already, home buyers and sellers that The Straits Times spoke to said that with the wide publicity of the guidelines removal, they feel their bargaining power has been enhanced.
House-hunter Vivan Wong, for example, said agents used to wave the guidelines in front of her, to justify collecting a 1 per cent fee for HDB transactions. "Now I can wave the CCS statements back at them," she said. She doesn't see why she has to pay 1 per cent to the sellers' agents. "Unless I specifically engaged a agent to hunt for a house for me, then I'll be happy to pay."
Generally, the mood on the ground is people are expecting fees in to dip in favour of the consumer. It'll be interesting to see if agencies' records on commission amounts will go down. PropNex agents collected $126 million in commission last year; ERA Asia-Pacific agents raked in $166 million. Both agencies are major players in the local property market. This was in the boom-time, of course, so any change in this year's earnings will be a combination of factors due to market conditions and the removal of fee guidelines.
Agents, however, are quite adamant that they will stick to their rates. PropNex agent Damien Goh, who sells an average of five properties a month, said 2 per cent was "already a very reasonable rate". Marketing just one property costs about $500 a month in advertisement costs, and another $100 in transportation costs, not to mention phone bills and overhead costs such as renting an office cubicle etc.
"I will show by actions and service, that I deserve that commission. If buyers or sellers still demand lower rates, I'll have to decide on a case by case basis. But if the fees are too low, I'll just look for another buyer and seller. I believe people will pay for good service," he said.
Other agents are less optimistic. Some say Singaporeans, known for their haggling, will demand the same level of service at low prices. "This may lead to more errant agents, who have less loyalty to their customers," said one agent who declined to be named. Complaints about agents to Case might even go up, he suggested.
PropNex chief executive Mohamed Ismail pointed out that the fees removal comes at a time where the industry is moving towards greater self-regulation, and agents are encouraged to move towards professionalism. "The impact of the fees removal can have two effects: agents will start to up their quality to be able to charge higher fees. Or two, a consumer-led dip in fees might lead to more irresponsible actions, if agents don't feel they're being paid enough."
On the other hand, home-buyer Tania Goh said unscrupulous agents who have a gem of a property could also jack up commissions if they know buyers or sellers are desperate.
Ultimately, the onus is on the consumer to be informed and educated about what the market rates and decide for themselves what are reasonable rates they should pay their agents.
The CCS move encourages competition in the market, and if agencies or agents can offer the same services for less money, there's no reason why market-based rates cannot prevail.
Time will soon tell who will be the real winners: consumers, or agents - or perhaps, both.