Paid by the hour

There was an interesting letter by a Huang Qiao Ying to The Straits Times recently about property agent commissions. Truth to tell, it’s one of the best forum letters I’ve read in the last year. Here’re some snippets of it:

May 13, 2008

What kind of paperwork deserves that much money for property agents?

I WRITE to join Mr Patrick Sio’s discussion on the contentious issue of the 1 per cent property sales commission. Let me state that I am all for real estate agents who deserve their due. If a buyer has commissioned an agent to represent them as they have no time to look for a HDB flat and are in need of the agent, by all means, the agent has earned it. An independent buyer’s position, however, is completely different.

…

Saying that independent buyers should pay the 1 per cent commission in order to make up for the lower commission they make on HDB flats is like saying we should all pay a $2,000 airfare regardless or whether we are travelling to Los Angeles or Bali so that the airline company can make up for the ‘loss’ in profit. What’s the rationale behind that? It is utterly ridiculous and a blatant perversion of financial integrity.

The fact that agents say the 1 per cent commission is due them in order to boost their earnings on a lower-priced sale already betrays their position. In which case, how can the same agent represent both seller and the independent buyer?

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If, for example, having to fill in names and details, say five times over, in a 25-page document equals to a lot of paperwork and I get thousands for that, I think we need to seriously consider making an executive profession out of this prestigious task that seems so difficult it’s beyond the mental capacity of any independent HDB flat buyer. We must be a nation of HDB dwellers who do not know how to write even our own names.

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Even conveyancing lawyers do not represent both the seller and buyer. And these agents are not even required to have relevant qualifications. If they were to be paid by the hour, independent buyers would be paying them by the thousands. That’s a $1,000-$5,000/hr job. Even Donald Trump has to do a lot more than ‘paperwork’ to earn that kind of a salary. Never mind that agents submit part of the ‘paperwork’ online these days in less than 15 minutes.

Apparently, this several year-long controversy was given new steam by one property company’s recent attempts to bring to court a couple who were acting as independent buyers and had refused to pay the property company commission. There’s also been forum postings on the ST discussion room and elsewhere reporting crooked property agents.

Thankfully, our own experience with our purchase of our home at The Rivervale was comparatively pleasant. We did hear about the 1% commission for both buyer/seller issue, but as I recall it, our property agent did not collect the 1% commission from us as buyers. We did however accede to his request for a very slightly sale price for the apartment in order for him to receive the 1% commission from the apartment’s seller. I thought this was fair enough, since the agent was knowledgable, had been helpful etc., and we did buy our home at a very attractive price.

Still, it’ll be interesting to watch this thread of news in the weeks to come. I certainly look forward to reading how the property companies will respond to Ms. Huang’s letter.