Real estate agencies deserve their cut

I REFER to yesterday’s letters by Mr Chua Khim Leng (‘New rules should protect property agents‘) and Mr Jason Sim (‘Zero commission? It’s too good to be true’).

The Institute of Estate Agents was advised by the Competition Commission of Singapore to remove its commission guidelines in June last year. In the commission’s view, the guidelines are ‘harmful to competition, restricting competition in both fee levels and fee structure in the real estate industry, and likely to have the object of appreciably restricting competition among real estate agents in the real estate agency market’.

The commission guidelines were officially removed in September last year. Mr Chua’s suggestion to standardise commission rates is not tenable as it is anti-competitive.

Agencies are at liberty to set their own fee guidelines and compete with each other on value propositions to their clients. This is where agents play a key role in adding value to the services provided.

Mr Chua’s gripe that estate agencies should not take a cut of 10 to 30 per cent from each transaction closed by property agents because the agencies provide little or no support to agents may not be universally true.

Besides office space and administrative support, agents benefit from the estate agencies’ branding, listings, regular training and business networks with developers as well as corporate clients.

As agents are not individually licensed by the authorities, they operate under the auspices of the agencies through an associate agreement and the latter are vicariously responsible for the actions of the agents.

Taking a cut of an agreed percentage from the agent’s commission in each transaction would not be an unreasonable business practice as agents can negotiate contract terms with the agencies they wish to join including the relevant percentage cuts.

Agents who collect ‘zero commission’ from sellers and yet require them to sign an exclusive agreement, in Mr Sim’s example, continue to have professional duties towards the sellers to co-broke whenever necessary in the interests of their clients. The agent’s professional obligations to the sellers are not set aside simply because he has decided to waive the payable commission.

Dr Tan Tee Khoon

Chief Executive Officer

Singapore Accredited Estate Agencies Ltd

Source : Straits Times – 20 Oct 2009


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