Wednesday, September 13, 2006
[RealEdge] TodayOnline Forum : What's the deal with commission?
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| What's the deal with commission? Dual commission does not mean conflict of interest Too many agents jostling for too few deals Wednesday ?September 13, 2006 Letter from Low Swee Kim 2nd Vice-President Institute of Estate Agents ?5th Council Letter from Jason Chew We refer to the letters from Jimmy Ho, Phong Kah Ho, Cheng Chin Chin and Gray Lim Gay, "Dual commission is just not right" (Sept 4). Let me first respond to the question, "Why does the buyer have to pay commission to the seller's agent?" The short and straight answer is that the buyer shares the brokerage fee with the seller for a Housing and Development Board (HDB) deal. In an open listing, a seller or buyer may not specifically appoint an agent. However, when they agree to transact the deal through an agent, the brokerage fee or commission is payable. As to whether the commission payable is a "guideline or requirement" While the fee for a single deal may seem high, this has to be evened out against unsuccessful deals, which the agent has also put in time, effort and expenses to market. Finally, I would like to address the issue of "dual commission, conflict of interest and ethical standard market practice". Mr Phong Kah Ho in his letter has correctly pointed out that in the Institute's Recommended Guidelines on Commission, it is spelt out that an agent shall not accept commission from both the seller and buyer in the same transaction without their prior knowledge. This is precisely to safeguard against any conflict of interest or unethical practice. For an HDB transaction, the agent handling the deal for the buyer and seller will be very much pressurised to achieve a win-win situation (ie, willing buyer and willing seller for an agreed price). As such, no one needs to be disadvantaged against his will. In practice, many deals have been successfully and smoothly transacted by agents acting for both parties. Over the years, there has hardly been any complaint regarding conflict of interest or unethical practice arising from such a scheme of commission payment. In view of the recent spate of letters expressing doubts about the real estate agent's job scope and agency fees, the Institute will be organising public forums in the coming months on such related topics. I refer to the letter by Yap Swee Hoo "Dual commissions help make ends meet" (12 Sept). In the third paragraph, Mr Yap notes that "it is not every day or month that a housing agent can close a property deal ?Many housing agents have been known to languish for months without closing a property deal, for the tough market competition ?" The fact is that every commission-based sales job has a chance of failure despite the hard work from the agent. This is natural in this line of work. By mentioning the tough market competition, Mr Yap has just provided himself with the crux of the entire problem. The market for housing agents is oversaturated. Too many agents are fighting for too few deals, which is why agents find the need to charge both the buyer and seller to make his own ends meet. One should remember the basic market rules of demand and supply. If an agent finds there are insufficient deals for himself and his colleagues to "make ends meet", some of them should simply leave the industry and find a new job, as opposed to asking for higher commissions. This is not a welfare state, and property buyers and sellers should not be forced to support your livelihood, no matter how high or how low your standard of living. | |
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// posted by Shajahan @ 9:56 AM 