Property agents difficult with commissions? New agreement wants buyers to pay own agents directly

SINGAPORE — Meeting unfriendly seller agents who ignore her texts "all the way" is common for 14-year veteran property agent Grace Cheong.

Recounting creative "unethical" methods that seller agents use to avoid sharing co-broking commissions with buyer agents, Cheong said she once encountered an agent who blatantly postponed her buyer's viewing at Water Place in Tanjong Rhu to an indefinite date, and prioritised viewings with direct buyers who are not represented by any agent.

As Cheong and her buyer contacted him separately, they managed to see through his ploy. But the agent subsequently insisted that her buyer could view the home that weekend only if he came unaccompanied.

"How is this fair to buyers who just want homes?" Cheong asked.

Currently, for private property sale transactions, buyer agents have to negotiate with seller agents for their share of the commission through co-broking since buyers do not pay commission to the agents representing them.

The commission for such transactions is usually two per cent of the property's sale price, of which the seller agent typically gets one per cent to 1.5 per cent and the buyer agent gets 0.5 per cent to one per cent.

On Nov 14, 16 property agencies — representing 88 per cent of the over 34,000 property agents in Singapore — inked a pact in a move to address the issue of agents trying to avoid sharing co-broking commissions.

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The signatories included PropNex, ERA Realty Network, Huttons, OrangeTee and Tie and the Singapore Estate Agents Association (SEAA).

The agreement encourages agents to adopt a best practice guide for co-broking commissions from July 1, 2024. It calls for buyer or rental agents to collect commission fees from buyers or tenants, while sellers or landlords pay the agents representing them. These arrangements should be finalised in text before engaging clients.

While buyers are currently not required to pay their buyer agents commission fees, property agents say these fees are often factored into a higher sale price to account for the cost of co-broking commissions.

The agreement hence translates to a more upfront method of paying each client's agent his commission.

The Council for Estate Agencies requires agents to be open to co-broking opportunities, and failing to do so is a disciplinary breach. However, some agents said they avoid lodging a complaint with the council as the process is cumbersome and time-consuming.

Co-broking applies to more than 90 per cent of private property resale and rental transactions, according to ERA Realty Network's key executive officer Eugene Lim.

SEAA said the sharing of commissions creates potential conflict of interest, as the buyer's agent is caught between putting the buyer's interests first and protecting his own commission — which would, in effect, prioritise the seller's interests.

Buyer agents may persuade their clients to view only units that offer them a higher percentage of co-broking commission, which might not be the cheapest or most suitable units for the buyer, said property agent James Lim.

Buyer agents The Straits Times spoke to said they occasionally receive commission directly from their clients, though this is rare and such instances last occurred in 2021 — before the private resale market faced a shortage of supply, along with a surge in demand for HDB flats and private units.

OrangeTee and Tie's chief executive officer Steven Tan said the agency handles one or two co-broking disputes every month.

The agreement could pave the way for a new norm in industry practice instead of making agents rely on sharing co-broking commissions, he added.

PropNex key executive officer Lim Yong Hock noted that many agents "block" co-broking opportunities by bypassing the other party's agent to approach the client directly, or by rejecting deals — which deprives clients of the opportunity to view, buy or rent certain properties.

He also cautioned that the adoption of this new pact will not be smooth-sailing, as it is not legally enforced by any authority.

This means that agents can still choose to not work together with other agents, and certain seller agents may even take advantage of the guide to reject sharing commissions via co-broking.

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Celia Nunes, a property agent of 12 years, said some agents may refuse to share co-broking commission by citing how buyer agents would be paid by their own clients.

On the absence of legal enforcement, SEAA said it will work with agencies to educate agents and clients, as well as encourage them to adopt the best practice guide.

PropNex's Mr Lim said: "It will take a while to see the impact of the agreement. Some customers may not see true value in paying their agents, and that is why agents need to keep abreast of market developments to give the best advice to their customers so that they can rightfully ask for commission."

PropNex had introduced a mandatory companywide co-broking policy in November 2022, and penalised errant seller agents by forfeiting their commission.

Alex Deven, who often handles sales of good class bungalows, said the new change would require some time for his buyers to get used to as the quantums for such sales are large.

Other agents like Henry Lim spoke of complications that may arise from the pact, such as having more buyers being put off by the buyer agent fees, and handling their resale purchases without an agent.

Cheong said SEAA should educate clients on the value that buyer agents can bring to the home-buying process and the relevance of paying them commission.

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This article was first published in The Straits Times. Permission required for reproduction.