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Thread: 'Flipping' property for a quick profit

  1. #1
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    Default 'Flipping' property for a quick profit

    Feb 8, 2009


    'Flipping' property for a quick profit

    Agents speak out on how common practice is, and conditions for an ethical transaction

    By Shuli Sudderuddin and Fiona Chan

    A couple flipped when they found out that the flat they sold through a property agent had been 'flipped' by his boss' wife.

    She quickly resold it - for a big profit.

    The couple went to court, and last week a judge decided the agent was unethical, and ordered the firm he worked for to pay the sum of the profit to the couple.

    What exactly is 'flipping of property' and - given that there are claims it is a common practice - when is it unethical?

    Last week's case sheds some light.

    'Flipping' takes place when someone - usually a speculator or even an agent - buys a property and resells it quickly to make a quick buck.

    The court heard that Mr Yuen Chow Hin, an IT company vice-president, and his wife, Madam Wong Wai Fan, a housewife, had sold their two-bedroom downtown flat for $688,000.

    Their ERA Realty Network agent had told them this was the best price they could get. But they later checked and were shocked to learn that the buyer of their Riverside Piazza unit had immediately re-sold the flat for $945,000.

    There was another shock: The first buyer was the wife of their property agent's boss.

    The judge, deciding that the agent and his boss had not acted in the Yuens' interest, ordered ERA to return them $257,000.

    The Sunday Times spoke to six real estate agencies. Most said the verdict was fair.

    Said Mr Steven Tan, executive director of property firm OrangeTee: 'I think the verdict is correct. The moment we decide to let agents represent us, we have to be accountable for their mistakes.'

    Agencies agreed that cases similar to the Yuens' are uncommon. But they were divided over how common flipping is among agents.

    'I don't think it's widespread... As agents, we are trained and we have a code of conduct and ethics,' said Mr Ho Tian Lam, DTZ's chief executive officer.

    Some agencies disallow flipping. At C&H Group, when agents join the company, they must sign an agreement with a clause that they must not act as an agent to buy a property under their own name or a nominee's name, like a wife or a friend.

    Other industry players say flipping by property agents is not uncommon but is usually done in an 'ethical' manner.

    Mr Mohamed Ismail, chief executive of PropNex, said flipping usually happens in a buoyant market.

    'It is not wrong for an agent in a good, speculative market to take a risk by buying property from a client and then selling it,' he said.

    But two conditions have to be fulfilled for it to be an ethical transaction, he said.

    First, the agent must be transparent to the seller about who the buyer is.

    Secondly, if the agent buys the flat, he must buy it at a reasonable price from the seller and he cannot make a 'secret profit' by underpaying the seller.

    Said a property agent who wanted to be known only as Ms J. Tan: 'We are human and we buy property too. If we are interested in buying it ourselves, we have to make it known and not keep the owner in the dark.'

    Ms Ivy Lee, chief executive officer of Ivy Lee Realty, said that if the agent pays the clients the price of their choice, it is acceptable.

    But she added this proviso: 'The agent should make the seller aware of the prices involved relative to the value of the property.'

    How did the Yuens smell a rat?

    The discrepancy was spotted when the Central Provident Fund (CPF) Board asked why they sold the flat well below the valuation obtained by the new buyer.

    Said a CPF Board spokesman of its procedure: 'When a member sells his property, he is required to refund the full CPF principal withdrawn and accrued interest.

    'If he is unable to do so, because he has to pay the bank first or the sale price is not sufficient to cover the required refund, CPF Board will ask for a valuation report to check that the property is sold at market value.'

    There are also agencies which, on their own initiative, take steps to protect clients in the event of a breach by their agents.

    Mr Ismail said PropNex ensures that all staff are covered with professional indemnity insurance so clients can make a claim if the agent is professionally negligent.

    HSR Property Group is also going to introduce professional indemnity insurance covering each agent for $400,000.

    A spokesman said it plans to launch it in phases soon.

    Also, there are agents who eschew any form of flipping, which they see as unethical.

    Said Mr Jeffrey Sim, a property agent with DTZ: 'If there's an opportunity to flip properties, sellers would jump on it. It's only human to do that, but I wouldn't do it because I don't want to take this risk and tarnish my name.'

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    Additional reporting by Estelle Low and Teo Wan Gek


    Mr Yuen Chow Hin, an IT company vice-president, and his wife, Madam Wong Wai Fan, a housewife, sold their two-bedroom Riverside Piazza apartment for $688,000 in 2007.

    They let it go at this sum as their ERA Realty Network agent Jeremy Ang said that this was the best price they could get.

    Unknown to them, the buyer of the unit turned out to be Madam Natassha Sadiq, the wife of Mr Ang's boss, Mr Mike Parikh. She quickly resold it for $945,000.

    The Yuens sued ERA for the 'secret profit' made in the second deal.

    Last Thursday, a High Court judge found that the conduct of Mr Ang and Mr Parikh amounted to breach of duty and fraud, and ordered ERA to return $257,000 to the couple.

    He also had a stern reminder for the industry of its ethical responsibilities.

    'If I'm interested in buying a client's property, I will always ask his permission. I tell him I'm the one buying it and I will match the price that he is asking for. Often, clients are happy to get the price they ask for and they don't care who buys it. You have to be upfront about it, declare yourself and explain the prices involved.'
    MS IVY LEE, chief executive officer of Ivy Lee Realty

    'Last year, the market was very hot so there were a lot of speculators, and a lot of agents earned money from flipping. Such cases do happen, but I will not do this. I feel that there will be a conflict of interests. If I were the seller, I would trust the agent to sell the property at the best price. There is no way to safeguard against people who may cheat clients when they flip property.'
    MR MUHAMAD SALLEH, property agent from HSR Property Group

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    Feb 8, 2009


    They thought they had good deal

    By Debbie Yong

    Her name was Natassha Sadiq.

    They thought that sounded like she was from the Middle East, which meant she had to be rich and could afford to pay top dollar for their property.

    And so the Yuens told their property agent: Okay, done deal.

    But six months after Mr Yuen Chow Hin, 50, and his wife Wong Wai Fan, 48, sold their Riverside Piazza apartment to Madam Sadiq for $688,000, they discovered their error.

    Madam Sadiq was actually the wife of the boss of their property agent.

    And even before she had inked the deal to buy their unit, she had already resold it for $945,000.

    That turn of events eventually led to a High Court case that ended last Thursday with the judge ordering property agency ERA Realty Network to pay the Yuens the $257,000 difference.

    The saga began in June 2007.

    Less than a fortnight after the Yuens engaged ERA property agent Jeremy Ang to sell their Riverside Piazza apartment near Clarke Quay, they were told that a buyer had been found.

    Mr Ang said a regular client of his was offering $650,000 for the two-bedroom unit, which is just below 1,000 sq ft.

    He added that OCBC Bank had valued the flat at between $650,000 and $700,000.

    When the couple asked why they were not offered $700,000, Mr Ang said it was because they had recently renewed a two-year lease with their tenant Yuji Kubo, a 57-year-old Japanese trader. The couple charged him $2,000 in monthly rent.

    Madam Wong told The Sunday Times yesterday that she took Mr Ang's word about the price, and did not check with other property agents if this was an industry norm.

    'We had no reason to be suspicious. Our main thought was that agents will try to get the best price for us because it means they get a higher commission too,' she said.

    Of the potential buyer, she noted: 'Jeremy said Madam Sadiq had bought many properties from him before and, judging by her last name, we got the impression that she was a rich Middle Eastern woman who regularly invests in property. We assumed we were getting a fair price.'

    The housewife and her husband, a vice-president in an information technology firm, live with their two teenage sons in a terrace house in Serangoon Gardens.

    The couple had bought the Riverside Piazza property in 1995 as an investment - the first time they had done so - paying about $609,000.

    They decided to sell it to help pay for a new condominium unit in Serangoon, jointly owned by Mr Yuen and his sister, for Mr Yuen's aged parents to live in, said Madam Wong.

    'I had told Jeremy to liaise directly with Mr Kubo about scheduling visits from potential buyers. Once, Mr Kubo complained to me that Jeremy had turned up at the flat without notifying him first, so I assumed Jeremy was doing his job,' she added.

    She said they did not set any price and had asked Mr Ang to obtain a bank valuation.

    The Yuens offered to sell the flat to Madam Sadiq for $688,000 on July 12. The latter said 'yes' on July 26. The couple did not meet Madam Sadiq in person.

    'For most lay people, once the price is agreed upon, you hand it over to the lawyers, banks and the CPF Board. It's a process that you don't think about because it's too complex,' said Madam Wong.

    In October 2007, the Yuens received a call from the Central Provident Fund Board about the discrepancy between the value of the flat - based on a valuation done by the new owner's bank - and the amount they had sold it for. That was when they sensed that something was amiss.

    After getting their lawyers to check on the caveat lodged on the property, they tracked down the new owner, engineer Teo Su Kee, 48, at his Toa Payoh home.

    They discovered that the transaction was handled by ERA agent Mike Parikh, who had put up newspaper advertisements - dated July 7, 9 and 14 - for their unit.

    They also found that Mr Teo exercised his option to buy the flat from Madam Sadiq on July 25 - a day before she agreed to buy it from the Yuens.

    Suspecting an internal arrangement among the parties, the Yuens checked with the Registry of Marriages and found out that Madam Sadiq was married to Mr Parikh.

    It was a 'surprise', said Madam Wong. Mr Parikh had handled the sale of her brother-in-law's HDB flat in Pasir Ris in 2006.

    Mr Parikh had also recommended Mr Ang, his subordinate, to handle the sale of her mother-in-law's HDB flat in Hougang in early 2007.

    The smooth transactions led the Yuens to entrust Mr Ang to sell their property as well.

    They wrote to ERA about their findings and refused to pay Mr Ang's commission of $7,361.

    'We tried to arrange a discussion with their directors. We only wanted some accountability and answers,' said Madam Wong.

    ERA wrote back to say that the two agents had done nothing wrong. In January last year, it made a claim against the couple at the Small Claims Tribunal for failing to pay the commission.

    It was this that prompted the Yuens to file the lawsuit against the company.

    Now that the judgment has been passed, Madam Wong said she feels some relief as the saga had caused her sleepless nights.

    But with ERA saying last Thursday that it intends to appeal against the court's decision, she acknowledged that 'it's not over yet'.

    'We don't know what the next step will be, but we will try to put it aside for now and get on with our Chinese New Year celebrations,' she said, adding that she has not made any plans for the money yet.

    'I will be more careful the next time and definitely not be so trusting,' she added.

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    Feb 8, 2009


    Buyer dragged into legal tussle

    All Mr Teo Su Kee wanted was to buy an apartment in the Clarke Quay area to invest in. He got more than he bargained for.

    The engineer was dragged into a lawsuit between the previous owners of his two-bedroom apartment and property giant ERA Realty Network, over the latter's unethical behaviour.

    Mr Teo, 48, who works in a multinational company, was called to appear in court to give his account of how he bought the flat.

    'I am just an innocent buyer, I do not wish to be involved in this. I am very frustrated,' he said of having to take time off work to testify.

    In July 2007, Mr Teo responded to an advertisement put up by ERA senior group division director Mike Parikh for the sale of a Riverside Piazza apartment.

    He told The Sunday Times yesterday that he checked out the apartment with Mr Parikh and another man, whom he could not remember.

    Mr Teo had been eyeing several apartments in River Place and Riverwalk that were going for more than $1,000 per sq ft (psf). When Mr Parikh offered him $998 psf for the flat, he accepted readily.

    'It was a good deal as I had been surveying the prices of several properties in this area, and it was within the market value,' he said.

    He learnt about seller Madam Wong Wai Fan's plight only when she visited him at his Toa Payoh home.

    'I was surprised that she sold the apartment at a price that was way below the market rate,' he said.

    There was another twist to the tale - Mr Teo found out from his wife that Madam Wong used to be her boss in a recruitment agency.

    With the court case over, he wants to put the experience behind him.

    He intends to sell the flat, but not immediately after his tenant, Mr Yuji Kubo, moves out. He also does not know the price he might get.

    A resident at Riverside Piazza, who got a valuation from a bank, told The Sunday Times yesterday that the unit is likely to fetch only about $860,000 now.

    Huang Huifen


    'All I know is that there has been a change of ownership, but I'm still paying the same rent, thus it is nothing related to me.'
    MR YUJI KUBO, 57, tenant of the Riverside Piazza apartment, on the legal tussle between the unit's previous owners and ERA

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