The Singapore government is considering an action to prohibit property agents from representing both the HDB flat’s buyer and seller in a similar transaction.
Such a decision aims to get the affirmation of sellers and home buyers. However, some agents are expected to disagree with the idea considering the budding loss of commission profits.
The Ministry of National Development (MND) released the proposal yesterday with the aim of improving the standards of the industry. According to MND, such a move would warrant that agents would not have any conflict of interest.
At present, a lot of disputes come up because a single agent represents both the seller and buyer in a similar HDB resale transaction. The practise entails that the agent of the seller often obtains a commission from the buyer and could resist a particular buyer if no commission could be obtained.
For instance, supposing that the agent of the seller obtains from a direct buyer a $300,000 offer for a HDB unit and is willing to give a commission. The agent will be able to collect one percent from the buyer and two percent from the seller. He then gets a total commission of $9,000.
However, supposing another buyer comes with his agent, offering $320,000, the agent of the seller could refuse even if the offered prise is higher as his potential commission is only $6,400 compared if he would deal from a direct buyer.
In a statement made by the MND, it said that this practise shows a vivid conflict of interest. Logically, buyers would want to pay the cheapest price and sellers naturally want to generate a greater profit from their property.
”The same agent cannot possibly discharge his professional duties to both equally and represent both their interests fully,” it added.
Nevertheless, it has been noted by MND that home buyers may also require the administrative assistance of an agent. MND proposes that the agent of the seller must receive a fixed administrative payment to assist in processing the paperwork of the buyer. On the other hand, buyers could handle the transaction alone or employ their own agents.
”This could be a big issue for agents since this practise has been adopted for many years now,” Eugene Lim, associate director of ERA, said. He said that ERA still supports the initiative as it prevents conflicts of interest and protects the consumer.
According to Mohamed Ismail, chief executive of PropNex, refusing to co-broke to earn higher commission is common for some agents.
”In the longer term, agents will not lose out as it levels the playing field. All agents will have to co-broke, and everyone will get his rightful commission,” said Mr. Ismail.
One home buyer said, "This is definitely moving in the right direction. The industry needs more regulation to protect sellers and buyers.”