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Thread: Fee guidelines for property agents deemed anti-competitive

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    Default Fee guidelines for property agents deemed anti-competitive

    http://www.businesstimes.com.sg/sub/...91006,00.html?

    Published August 6, 2008

    Fee guidelines for property agents deemed anti-competitive

    IEA has until Sept25 to remove its recommendation on fees, fee structures

    By UMA SHANKARI


    EXISTING commission guidelines for property agents - drawn up by industry body Institute of Estate Agents (IEA) - are likely to infringe the Competition Act, the Competition Commission of Singapore (CCS) said yesterday.

    The guidelines stipulate fees and fee structures for agents and agencies dealing with various types of property transactions. For example, for HDB properties, the guidelines state that a seller pays a minimum 2 per cent of the contracted price as sales commission and a buyer pays one per cent of the contracted price as service fee to agents.

    The IEA's position is that the guidelines are non- binding and that agents are free to negotiate fees with their customers.

    However, the CCS holds the view that even if the price recommendations are not binding, they will still provide a focal point for prices to converge. 'This will dampen competition and facilitate price coordination,' the commission said in a statement yesterday.

    CCS further noted that the fees payable by sellers are couched as a minimum fee recommendation in the guidelines. Said CCS: 'This practice discourages any price competition below the recommended rate. More efficient estate agents or agencies, which are able to charge lower rates, will have little incentive to do so.'

    Estate agents and agencies should set their fees independently, the commission advised.

    Likewise, consumers should exercise their right to negotiate fees and terms with estate agents as this will encourage competition among estate agents and agencies, CCS said.

    CCS' decision came about after the IEA had applied to it for guidance on whether its published fees guidelines could restrict competition in the real estate agency market in Singapore.

    CCS, which found that the guidelines are indeed likely to infringe the Competition Act, informed the IEA on June 25 and advised it to remove its recommendation on fees and fee structures. IEA now has until Sept 25 to comply.

    Property firms here said that the removal of the guidelines is unlikely to have much of an impact.

    'IEA's guidelines shadow what most property agencies have in place,' said Eugene Lim, assistant vice-president of property agency ERA Asia-Pacific.

    The fee structures are unlikely to change with the removal and agencies will not undercut one another by lowering their fees, he said.

    'IEA's guidelines were, in essence, just that - only guidelines,' said PropNex chief executive Mohamed Ismail. 'Many agents on the ground often negotiated their own commissions anyway.'

    The move by CCS, Mr Ismail said, was not unexpected. The Singapore Medical Association and Law Society were also subject to a similar removal of guidelines, he added.

    Separately, the Consumers Association of Singapore (Case) said it is glad that the guidelines will be removed. 'In our view, the guidelines are anti-competitive in orientation and work against consumers' interest,' Case said.

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    http://www.straitstimes.com/Free/Sto...ry_264971.html

    Aug 6, 2008

    Property fee guidelines must go, says watchdog

    Move could foster competition and a price war among real estate agents

    By Jessica Cheam


    HOME buyers and sellers will be able to haggle over the commission they pay property agents after a guideline on fees is axed next month.

    The Competition Commission of Singapore (CCS) said yesterday that the guidelines adopted by the Institute of Estate Agents (IEA) in 1999 are uncompetitive and must go.

    The surprise move could spark a price war among agents, say some experts.

    Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, believes buyers and sellers will be the winners: 'Consumers should not accept agents who are harping on the old fee practices and should be free to bargain.'

    At present, sellers of Housing Board flats generally pay the agent 2 per cent of the purchase price while the buyer pays 1 per cent. In private property transactions, only the seller pays 2 per cent.

    The IEA guidelines have become standard practice, a point addressed by the competition watchdog yesterday.

    It said that while the guidelines are not binding, 'they provide a focal point for prices to converge. This will... dampen competition and facilitate price coordination.'

    It also noted that they are stated as a 'minimum fee', which discourages any price competition below that rate.

    'Agents should not be constrained to offer the same price,' said the CCS, which told the IEA on June 25 that the guidelines 'are likely to infringe the Competition Act'.

    IEA president Jeff Foo said the institute, which represents about 1,600 agents, will axe the guidelines by Sept 25.

    Industry leaders had mixed reactions to yesterday's news. Some say the impact will be minimal as agencies will keep the status quo but other experts forecast an agents' price war, especially during market downturns.

    'This throws open negotiations between agents and sellers or buyers. Market conditions will determine who has the upper hand,' said Mr Colin Tan of property firm Chesterton International.

    In bad times, agencies could start under-cutting each other, or conversely, agents could demand higher commissions from desperate sellers and buyers, said Mr Tan.

    Mr Chandran Pillay, senior vice-president of Global Real Estate Services, said smaller agencies like his cannot lower fees too much as they are already quite low and the costs of selling a property are high.

    House-hunter Tania Goh, 24, welcomed the room for negotiation but she was concerned about agents who 'can abuse this system when they know a buyer strongly desires a property'.

    PropNex chief executive Mohamed Ismail said the removal of guidelines 'may not be a bad thing' if agents up their service quality to justify the commission they get. His agency will use the IEA fee guidelines as the basis for negotiations with its clients.

    Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, said the 2 per cent fee is lower than the 6 per cent norm in the US, for example.

    IEA's Mr Foo said consumers should get written agreements on agents' fees before accepting any services.

    [email protected]

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    http://www.channelnewsasia.com/stori...365074/1/.html

    IEA to remove guidelines on property agents' commissions

    By Irene Chan & Pamela Almeda, Channel NewsAsia | Posted: 05 August 2008 2120 hrs


    SINGAPORE: If you're shopping for a new home or selling one, you can now negotiate with your property agent on the appropriate commission.

    The Institute of Estate Agents (IEA) will remove its guidelines on property agents' commissions next month, to fall in line with the Competition Act.

    Consumer watchdog CASE has welcomed the move, pointing out that it is not compulsory to have agents facilitate a property transaction.

    Property agents currently get about 2 per cent of a property's sale price from sellers, while buyers pay a fee of 1 per cent of the price. These guidelines were put in place some ten years ago.

    IEA said the guidelines were meant to serve more as a reference point for agents, as well as consumers, to prevent overcharging.

    But since the guidelines have been widely accepted and practised in the industry, the Competition Commission of Singapore (CCS) thinks that they may be harmful to competition.

    Jeff Foo, president of Institute of Estate Agents, said: "We submitted our professional guidelines to CCS sometime in July 2007 because we were concerned whether our guidelines do or do not infringe the Competition Act.

    "So after over a year of meetings and consultations, they finally came back to us on June 25 and said that our guidelines are likely to infringe on the Competition Act and advised us to remove them."

    With the removal of the guidelines, it is now up to individual real estate agencies to set their own commission guidelines. It is still unclear if this will reduce commission fees paid to property agents.

    IEA said the removal of the guidelines actually puts a greater burden on property buyers or sellers to do their own checks on market rates for such fees.

    Mohamed Ismail, chief executive of Propnex, said: "With such a move, the industry will find its own footing in terms of the kind of support as well as service. Overall, I must say that this will help the consumer because at the end of the day, the agents do not have a choice but to increase their level of service."

    Last year, the Singapore Medical Association withdrew its fee guidelines for doctors, paving the way for private doctors to set their own fees.


    - CNA/so

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    Default Housing agent fees: How low can they go?

    http://www.straitstimes.com/Singapor...ry_265321.html

    Aug 7, 2008

    Housing agent fees: How low can they go?

    With guidelines axed next month, rates will come under pressure but big fall unlikely, say experts

    By Jessica Cheam


    PROPERTY experts expect agents to feel the pinch once fee guidelines are abolished next month, but the big question in the industry is just how low fees can go.

    Real estate insiders concede that fees will come under pressure with buyers and sellers free to haggle, but dismiss the notion that rates could plummet to zero.

    'In a buyer's market, perhaps, buyers can get away without paying. But agents also need their salaries and ultimately consumers will get the service they pay for,' said PropNex chief executive Mohamed Ismail.

    Agents spend about 40 per cent of their commission on the marketing, transport and operational costs of selling a flat. Active agents earn about $5,000 a month, said Mr Ismail, so how low rates go will depend on the individual.

    Those who aim for a large turnover of properties might be willing to slash rates but this could be at the cost of service quality, he added.

    Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, does not see rates falling drastically as the current rate is one of the lowest in the region.

    Fees will be negotiable next month, thanks to a decision by the Competition Commission of Singapore, which told the Institute of Estate Agents to axe its guidelines on commissions.

    The 1999 guidelines were based on a 1974 Government Gazette that stipulated a 2 per cent fee payable to agents from sellers. In the past, when Housing Board prices were relatively low, agents began charging buyers a further 1 per cent.

    The Consumers Association of Singapore is advising people not to be held to old guidelines and to avoid giving exclusive rights to agents. It also said agents should not collect fees from both buyers and sellers, due to conflict of interest.

    The new playing field will offer plenty of scope for buyers, sellers and agents to negotiate, but agency boss Albert Lu of C&H Realty pointed out that the real estate market is 'already very competitive'.

    For private property sales, for example, agents are known to cut their commission charges from the recommended 2 per cent to 1 per cent for sellers.

    'It's not in the interest of agencies to start price wars, as we end up hurting ourselves,' said Mr Lu. But he suggested that agencies might devise ways to entice buyers and sellers, such as bundling home services.

    Industry leaders do not rule out a 'one-stop shop' concept where agencies could offer agent and legal services along with loans, for example.

    Analysts believe consumers will be quick to take advantage of the new system and start haggling, but given the slow market, it is unclear who has the upper hand. Prices have eased in favour of buyers but many sellers are not budging, so with volumes down, agents may see an incentive to give discounts.

    Homebuyer Vivian Wong, 25, said she will bargain harder while agents vow to fight and justify commissions. HSR Property Group's Mr William Tan, 43, said he was confident of retaining the 2 per cent commission.

    'In this new landscape, the better agents will survive because they will offer quality service consumers will pay for.'

    [email protected]

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    Default Removal of property fee guidelines unlikely to have deep impact

    http://www.channelnewsasia.com/stori...365334/1/.html

    Removal of property fee guidelines unlikely to have deep impact

    By Wong Siew Ying, Channel NewsAsia | Posted: 06 August 2008 2137 hrs


    SINGAPORE: Market players said on Wednesday that the move to scrap guidelines on property agents' fees by September 25 is unlikely to leave a deep impact on the real estate sector. However, they warned against rogue agents who may try to cash in on the change in rules.

    The Competition Commission of Singapore (CCS) ruled on Tuesday that the fee guidelines adopted by the Institute of Estate Agents (IEA) should be removed as they are uncompetitive. Under the current guidelines, property agents stand to pocket a commission of 2 per cent of the transacted price.

    With the removal of the guidelines, buyers and sellers will be free to negotiate the fee payable to their agents. Real estate agencies are generally supportive of the move, but they are concerned that the lack of fee guidelines could trigger more rogue practices.

    Chris Koh, director of Dennis Wee Group, said: "If the owner is not aware of what the market price of his property is, then he may fall into a trap where the rogue agent says, 'Ok, you want a million dollars, that's what you said you want, I will get you that S$1 million.

    "But if I sell your property at S$1.2 million, then that S$200,000 is for me to keep since there is no guideline that it must be a percentage'."

    Another real estate company, Propnex, warned against agents who offer unnecessary services just to quote a higher commission.

    Without any fee guidelines, market players said it is down to the agencies to set their own commission structure. Propnex said consumers must assess their agents based on their commitment, track record and knowledge of the market.

    Some industry players said the removal of the commission guidelines will not spark a price war because the cost of marketing a property has nearly doubled in the past ten years, and it will not be sustainable for agents to start under-cutting each other.

    On average, about 10 to 20 per cent of the agent's commission goes into marketing efforts, such as taking out advertisements to promote a property. Paying a lower commission does not necessarily mean a better deal as agents may not put in as much effort to sell a property.

    Some Singaporeans prefer to sell their properties on their own. Rosanah Mon helped her mother sell her three-room flat at Jalan Bukit Merah for S$230,000, saving over S$2,000 in the process.

    "I don't see the necessity (to get a property agent), if you know the procedures well and you follow the guidelines," she said.

    In fact, the Housing and Development Board (HDB) said it has seen an increase in the number of such transactions rising from 5.5 per cent of total resale transactions in 1998 to about 8 per cent now.

    To boost greater understanding of the sales procedures, HDB holds monthly resale seminars, with the next one scheduled on September 6. More information is available online at www.hdb.gov.sg.


    - CNA/so

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    http://www.straitstimes.com/ST%2BFor...ry_266638.html

    August 11, 2008 Monday

    Bad and irrational to axe property commission guide 10 min


    NO DOUBT about it. The removal of property agent commission guidelines by the Institute of Estate Agents is a bad and irrational move.

    The institute has undone its many years of good work that instilled a sense of proper worth for the work agents do. The public and the media are always inclined to portray agents as devils and the clients as angels or damsels in distress. While there are exceptions to any rule, I would argue to the contrary. Show me one client of honorary character, and I'll show you 10 agents who will return the favour over and beyond the call of service.

    The fact of the matter is, the gentleman's client is a rarity in the Singapore property market. The largely fictional scrupulous agent is a direct result of the dearth of principled clients. In theory, one devil client is enough to spawn 10 devil agents. Sadly, nine in 10 clients tend to be the devil. This is a market that never appreciates good service offered, though exceptions apply. Regardless of the industry, monetising good service is close to impossible with Singaporeans. When your business comprises all service and no tangible product, it becomes a huge problem of survival.

    Removing commission guidelines in a gentleman's market is well and good, but to do so in Singapore is detrimental to the industry and its benefactors, both agents and clients. Soon everyone will have forgotten there were ever guidelines. And most clients will try to get away with free service and a pound of flesh. As the situation deteriorates, agents will tend towards bad service, and the honest ones will eventually drop out. And we will have a scoundrel's playground for a real estate market. Welcome to reality.

    In any case, Institute of Estate Agents guidelines were just that. No agent could effectively enforce them, because they were not enforceable in court. What the guidelines did was to give the collective conscience of property players a proper perception of the worth of work done by agents. Now that thin string to common sense is gone. Get ready for many sad stories.

    Forget about Integrity, Service and Excellence. Expect minimum, disgruntled and devalued service.

    James Rajan

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    http://www.straitstimes.com/ST%2BFor...ry_266666.html

    August 11, 2008 Monday

    Property fee guidelines: Praise for Competition Commission


    I READ with gladness that at last the Competition Commission of Singapore has decided that the guidelines adopted by the Institute of Estate Agents are uncompetitive and must go ('Property fee guidelines must go, ways watchdog').

    For too long, estate agents acting in Housing Board sale and purchase transactions have called the shots and demanded that sellers pay a 2 per cent commission and buyers a 1 per cent commission, even though the buyers do not appoint the agent in the purchase, nor do the buyers agree to pay them any commission.

    There have been cases in the past where agents sued buyers for their commission because they thought they were 'entitled' to it, citing the guidelines and 'market practice' and because they have the upper hand and the means to start legal proceedings.

    With the clear stand taken by the Competition Commission, I have no doubt that sellers and buyers will now be in a better position to weed out agents who are unprofessional, unscrupulous and arrogant, thinking they can bull doze their way through without conducting themselves properly.

    To be fair, there are agents who are well trained, professional and act in the interests of their clients, be they sellers or buyers, and they would be more than willing to pay them the commission agreed in writing before they accept the agents' services.

    I hope all sellers and buyers will now be more aware of their rights when dealing with housing agents and not allow agents to control them in the area of their commission.

    Tan Swee Hong (Mdm)

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    http://www.straitstimes.com/ST%2BFor...ry_268120.html

    August 15, 2008 Friday

    After rule change, consider plight of estate agents


    THE announcement on removal of estate agent's commission has left agents to the mercy of the public. It encouraged the public to view agents' services as a commodity to be bargained over and not see agents as human beings performing an uncertain job with no fixed pay, no CPF and no Medisave.

    The statement has resulted in ridiculous requests by owners who deliberately ignore the hard work and costs put in by agents. For example, I now have a case where I am marketing a property with construction sites right, left and centre for a month. Costs are high because lag time is longer with market slowdown and after a long time, there is only one offer. Despite this, the owner wants to offer 50 per cent discount because I had a direct buyer.

    Does anyone stop to think agents we have no CPF and no Medisave? And if I don't do any deals in the seventh month, I need to use my savings to pay my expenses. No, they don't. Agents and buyers are two parts of one equation. If only one side is protected, the other side will be victimised. A few hundred thousand ricebowls are at stake. We have families too. Please consider us too.

    Lynette Choy

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    http://www.straitstimes.com/ST%2BFor...ry_268572.html

    August 16, 2008 Saturday

    End to guidelines a double-edged sword


    I REFER to the article, 'Property fee guidelines must go, says watchdog' (Aug 6). As the first chairman of the legislation committee of the Institute of Estate Agents (IEA) that was responsible for the IEA code of ethics and conduct, and commission guidelines, I would like to clarify that the guidelines were not mandatory. They were crafted as a basis for consumers and agents to collaborate and achieve win-win results.

    The removal of guidelines will provide consumers with choices. However, with choices come great responsibilities to choose the right professional agent who will represent the consumer's best interests and not one who quotes a lower commission.

    Ultimately, it is not the commission but profit that counts. The commission is a small percentage compared with the potential gain or loss as a result of appointing the right or wrong agent.

    Consumers need to work with established, reputable and successful real estate companies. These organisations should subscribe to a published code of ethics and conduct.

    In addition, as reputable companies need to protect their image, they are more inclined to train their agents vigorously, empower them with better technologies and equip them with a more comprehensive range of marketing tools.

    If they are worth their salt, they should also be able to provide consumers with unconditional guarantees to assure them of a high standard of performance, service and results. If agents can do all of these things, they will have justifiably earned their commission.

    Patrick Liew


    'Is the procedure for an HDB resale so much more complex than a private property deal?'

    MR TAI MENG KIAN: 'The recent move by the Competition Commission of Singapore to scrap the property fee guidelines did not address the issue of collecting commissions from HDB flat buyers. The guideline stipulates a 1per cent commission to be paid by the buyer. Shouldn't the commission paid by the flat seller encompass all the necessary paperwork, as in private property deals? Is the procedure for an HDB resale so much more complex than a private property deal?'

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