Feb 9, 2007

Two agencies launch property sale 'guarantee' scheme

By Jessica Cheam

HERE'S the deal: List your residential property with us exclusively for a fixed period. Still not sold?

An open-market valuation by a panel of licensed valuers will be done, and we will buy your home - at 90 per cent of valuation.

That, in a nutshell, is what two real estate firms have come up with to woo private property owners in the current sellers' market.

It seems like a guaranteed scheme promising to buy your flat if the agent cannot sell it. Others advise caution.

One of the firms offering such a deal, HSR Property Group, launched its 'Guaranteed Sales Plan' last Saturday.

Under its plan, the property - if unsold after six months - undergoes valuation during a two-week window. It will then be put up for auction for 30 days. If the price fetched is more than 90 per cent, the difference goes back to the seller.

If the price is below 90 per cent, HSR will absorb the loss.

ERA Singapore launched a similar scheme yesterday at its annual business conference. Called the 'Sellers Security Plan', it also guarantees a purchase at 90 per cent of valuation price at the end of an exclusive three-month period.

The agency charges a 1 to 2 per cent fee of the property value for this scheme. HSR does not charge a processing fee.

The usual 2 per cent commission payable to the agent still applies for both schemes.

The house must also be in a move-in condition, and be qualified for home loans.

ERA Singapore president Jack Chua said this scheme has been popular in the United States for more than 30 years.

'Our objective is not to buy properties,' Mr Chua emphasised. 'But we want to give buyers a safety net.'

Only private homes are eligible for both schemes by HSR and ERA for now.

Mr Chua said, however, that plans to extend ERA's scheme to HDB flats are in the pipeline.

A third firm, PropNex, is about to launch its scheme. Chief executive Mohamed Ismail said the company will roll out a 'scheme of our own' next week but declined to elaborate.

On the terms of the two other firms' schemes, he asked whether 'people will sell below market value, especially in a buoyant market'.

HSR president Dennis Yong said that some customers have already taken up its scheme. He stressed that he was fully confident that his agents will sell at a good price within the exclusive period.

C&H Realty managing director Albert Lu said his firm had no plans for a similar scheme.

'These might be just sales gimmicks to attract customers, but are unnecessary as prices are rising,' he said.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, also said the scheme would be more attractive if the market was down.

'There's also the question of how the property is valued,' he added. 'Agencies might choose valuers who are more conservative. The difference could be quite a lot.'

Executive director Seah Seng Choon of the Consumers Association of Singapore agreed that this was a risk as customers must bear in mind that the buying price is normally much higher than the valuation.

'We would also like to advise consumers to read the fine print in the contract to look for additional costs other than the normal commission or legal fees payable,' he said.