I WELCOME the proposal to regulate property agents (‘Property agents to be regulated‘, Oct 5).
I wish to highlight an unethical practice of some property agents:
- Some agents put up advertisements claiming they take ‘zero per cent commission’ from sellers. This seems like a good deal for sellers, given that the market rate is 2 per cent commission. But these agents require sellers to sign an exclusive agreement lasting three months. If the seller breaks this agreement before its expiry, a penalty fee of $5,000 is imposed.
- These agents will also not be present during viewing sessions by potential buyers. They will SMS the viewing date and time to prospective buyers, and sellers will be left to handle the buyers and their agents.
- If sellers ask for $20,000 cash over valuation (COV), these agents will ask buyers for between $25,000 and $30,000 COV. If the buyer agrees to the amount, the agent will tell the seller the buyer has agreed to pay commission, and will write the commission amount on the option to purchase form and make the seller sign it.
- These agents mostly will not co-broke as they cannot take commission from the seller, so they have to scout for direct buyers to earn their ‘rightful’ commission, thus prolonging the sale process.
Many sellers often prematurely terminate the exclusive agreement, because of the absence of the agents during viewing sessions and the prolonged sale process.But if this happens, the agent will lodge a case with the Small Claims Tribunal, demanding $5,000 as compensation as the seller has broken the exclusive agreement. Most sellers do not want further trouble and end up paying the $5,000.
Sellers should not blindly sign an exclusive agreement, no matter how ‘good’ the offer. Remember, there are no free lunches in this world.
Source : Straits Times – 19 Oct 2009