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Guideline or requirement?

Letter from Phong Kah Ho

According to the HDB's website, "HDB does not stipulate nor regulate the commission charged by housing agents. The commission rate may vary depending on the level of service and consumer needs".

It points readers to the IEA's Recommended Commission/Fee for real estate transactions.

IEA sets guidelines for its body of estate agents, and as such the so-called "standard" market practice of commission payable is merely a recommendation.

Mr Low had said in his letter that "the seller and buyer are both required to pay commission to the agent". But since IEA offers only guidelines, it cannot be a "requirement".

Interestingly, the guidelines advise that "an Agency shall not accept any commission / fee from both the Vendor and Purchaser in the same transaction without the prior knowledge or written consent of the Vendor and Purchaser of the transaction."

The HDB also states on its website that "buyers and sellers are free to decide if they want to engage housing agents for their resale transactions. It is not a requirement that resale flat transactions must be facilitated by agents".

While engaging agents has its benefits such as "handling of the advertising, viewings of flats" and smoothening out the transaction process, it is "a private contractual agreement between the buyer/seller and the housing agent".

HDB has streamlined and simplified its resale procedures, especially with its user-friendly e-Resale system. But I believe it is not as successful as should be — primarily because the bulk of HDB resellers engage the service of agents due to the wide network of potential buyers they offer.

Even if buyers are keen to use e-Resale to handle their own transaction, they would often be unable to do so because the agent charged with selling the flat is unwilling to entertain them.

In such a situation, the agent would typically demand the recommended 1 per cent commission despite the minimal service rendered to the buyer.

I am looking for a HDB resale unit and have the following advice.

• If you decide to handle the resale transaction, inform the agent on the first viewing of your intention, to avoid wasting time.

• Alternatively, look for advertised units not brokered by an agent — though not easy to find.

Market conditions forced me to engage an agent. But since it is a private contractual agreement with the agency, I could specify the terms, types and level of service the agent should render, and negotiate for a lower commission if possible when I undertake certain paperwork myself.

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3% commission for agents is too high

Letter from Cheng Chin Chin

It might be standard practice for agents to collect commission from buyers and sellers, but in the eyes of the public, there is no rationale for buyers to pay commission to the seller's exclusive agent when the buyer is actually facilitating a sale.

And how could the agent be deemed as helping the buyer to do the paperwork, when both the buyer's and seller's documents must be processed together to complete the transaction in the first place?

Mr Low did not address the issue that the 3 per cent commission payable to estate agents (from buyer and seller) is on the high side. For submitting simple documents to HDB for the sale of a $400,000 5-room HDB flat, the agent or agency gets paid a whopping $12,000 in all by the buyer and seller.

Are estate agents earning on true merit? With 3 'O' level passes, a small commitment fee and by attending a three to five-day course, one could start selling properties and command a big commission, even with no prior experience and minimal knowledge of real estate laws and regulations.

My father-in-law, who has a PhD in Biochemistry, had to slog as a university lecturer for more than 10 years before his pay reached $10,000 a month.

Even my aunt who has not completed secondary education could tell me a great deal about how to carry out an HDB transaction. If intellectual work is ruled out in an estate agent's work and physical work is the consideration, then shouldn't Bangladeshi cleaners who work 12-hour shifts get paid like a university professor?

I urge the relevant authorities to revise the commission rates payable to estate agents for a single transaction, as 3 per cent is clearly too much when we consider the humongous transacted prices of properties in Singapore.

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Is 'standard market practice' ethical?

Letter from Gary Lim Gay

I made a written enquiry to HDB from the perspective of a potential seller. I was told that "sellers" (presumably applicable to buyers too) "who choose not to engage the services of the housing agent, would not be obliged by any contractual agreement to pay the agent any commission".

So I am confused by the IEA's reply that it is a "standard market practice" and "seller and buyer are both required to pay commission to the agent". It does not seem to be endorsed by HDB. Nor is this the standard practice in the private property market, which presumably comes under the same institute.

Therefore, it is logical to ask if this so-called "standard market practice" for the HDB resale market makes any sense.

Firstly, it is a strange notion that agents should collect commissions from both buyers and sellers. The agent, as a representative for either the buyer or the seller, has a fiduciary duty to represent his/her client to the best of his/her interest.

In any dispute who does the agent help? That is why, when engaging lawyers for buyers and sellers in the private property market transactions, we do not use the same lawyer nor the same law firm, to avoid conflict of interest.

This "standard market practice" stipulated by the institute should be questioned on ethical grounds.

In any case, HDB resale transactions are the simplest of all property transactions. The HDB website provides a step-by-step guide. Through the entire process, there will also be a HDB officer to help the buyer and seller through the legalities.

I question the need to pay a total of 3 per cent commission to agents in view of the amount of work done. The seller yes, if there is a contractual agreement requiring the agent to advertise, spend time organise the viewings — but for the buyer to pay is incomprehensible.