Adulting 101: As a property 'noob', I learnt agents' fees can vary a lot -- here's how to pick the right agent
Source: TODAY
SINGAPORE -- As the youngest in the family, I've always been quite comfortable living with my parents and having nothing to worry about in my material needs.
However, as my parents have grown older, they have often spoken to me about having to take over ownership of the home at some point.
This responsibility would fall to me because my only other sibling, my older sister, is already married and living in her own home.
So, this would essentially mean that I'd need to decide whether to keep living at the family home or sell the place.
As someone used to relying on others to make the "adult decisions" for me, this has made me uncomfortable.
For instance, I'm not keen on the idea of having to engage property agents to assist with selling the family home, if that's the decision I make.
And of course, if I did that, I would then need to buy a place of my own, likely a resale Housing and Development Board (HDB) flat.
My discomfort at the idea of dealing with property agents was exacerbated by horror stories I heard from my brother-in-law. He encountered one agent who tried to ask for more than the agreed commission after a sale.
He said: "We had initially agreed to pay the agent a fee of 2 per cent for the sale of our home but he later asked for more commission when we managed to sell the property for a higher price."
I asked if they had initially agreed on the fee and he said that they did but the agent later "guilt-tripped" him into thinking that more effort was put in to hunt for buyers.
Although reluctant to give in to the agent, he eventually paid a 4 per cent commission for the condominium that was sold.
The conversation made me wary, but it was a doorway into a world I'd never thought much about, so I did some online research about agents and commissions.
After all, I could find myself as both a seller and buyer of residential property some time down the track.
I learnt that some agents typically take between 2 per cent and 4 per cent commission or, in some cases, a fixed rate of 1 per cent. Then, there are others who take a flat fee as their commission. A flat fee remains the same no matter what the price is for the property sale.
Another key point is that it's usually sellers who pay the commission to agents, though buyers do so on occasions, such as when buying resale HDB flats.
Some fixed-rate agents have been using social media channels such as TikTok to promote themselves by questioning the need for homeowners to pay the typically higher commission rates.
These agents often tout the five-figure savings that their clients enjoy, even including testimonies with smiling photographs from some of them.
In turn, agents who go by commission-based fees have responded with their own social media posts claiming that flat-fee agents do not offer as complete a service as them.
Seeking clarification, I decided to reach out to property experts and academics to find out more about what a young potential homeowner like me should look out for when engaging my first property agent.
Buyers should expect to pay a 1 per cent commission if they are buying an HDB resale flat.
However, buyers generally don't pay a commission purchasing private properties such as condominiums and landed properties, because the buyer's agent will usually "co-broke" with the seller's agent to share the commission received.
Professor Qian Wenlan, director of the Institute of the Real Estate and Urban Studies at the National University of Singapore (NUS), said that property agents who accept a flat fee are "still a minority".
Most agents charge sellers the standard rate of 2 per cent of the purchase price of the property, she added.
One agency, Homeseller, which started out in 2019, charges a flat fee of S$1,999 to sellers of HDB resale flats and S$4,999 to sellers of condominiums.
It also charges a flat fee of S$1,999 to buyers of HDB resale flats.
So a buyer who appoints Homeseller to search for a HDB resale flat and buys it for S$790,000 will pay S$1,999 instead of S$7,900 that a commission-based agent charges.
A seller of a S$790,000 HDB flat who also pays S$1,999 will save more, given that the commission for agents is 2 per cent or S$15,800.
New property agency Smartseller charges S$3,700 for sellers of HDB resale flats, S$7,700 for sellers of condominiums, and S$15,700 for sellers of landed properties.
In this case, if a seller were to appoint Smartseller to sell his S$1.35 million condominium, the co-brokered commission would be the flat fee of S$7,700 instead of between S$27,000 and S$54,000, which is the 2 per cent to 4 per cent that a commission-based agent charges.
Prof Qian said that the main distinguishing feature of flat-rate agents is that they tend to offer only partial services, whereas agents who charge the standard fee provide the full suite of services.
Referring to flat-fee agents, she said: "They are responsible for just the advertising, arranging viewing appointments and supporting with paperwork."
Although they arrange the viewing appointments, they leave the seller to conduct the viewing.
Mr Dennis Lim, co-founder of property firm Homeseller who operates on a flat-fee basis, said that as an experienced property agent, he finds it "boring" to be around viewings because he does not add any value.
"I feel more accomplished when I focus on the prior consultation and the negotiation."
Mr Wilfred John Allais, marketing lead at Ohmyhome property agency, said that his firm charges 1 per cent commission for buyers and sellers of HDB resale flats.
The firm's agents will meet with buyers to discuss their housing preferences and understand their financial plans to ensure that they look at properties within their budget.
"Buyers can engage our agents to help find their dream HDB (resale) home at a fee of 1 per cent," he added.
"For condos, our agents will not charge the buyer but instead collaborate with the seller's agent through a co-broking arrangement."
On the other hand, agents such as Mr Geryl Lim from property firm OrangeTee take a percentage of the commission from sellers based on the transacted price for the sale or purchase.
He also said that first-time buyers would need to consider the customised scope of services that they are expecting from the agent before going ahead with a particular agent.
"As far as I am aware, most flat-fee agents do not turn up for appointments but leave the buyers to handle the viewings themselves, so these agents may not have any idea how the unit looks like or if there are any potential issues with the unit," Mr Geryl Lim said.
Without an agent present, it can be difficult to show off the amenities of the property, which could make a huge difference in deciding if the unit is worth the price listed.
Professor Sing Tien Foo, provost's chair at the department of real estate at NUS Business School, said that it is important to find and engage property agents who are reliable and have good track records.
He said that this is especially important for young people and first-time homeowners like me.
"These agents will be able to provide objective and also unbiased advice based on the client's needs and financial considerations, and will be able to act in the best of the their interest rather than be merely motivated by their commissions or fees," he added.
In addition to checking reviews and making time for research to see what types of property the agent has sold, property experts also told me that it is key to ensure that the agent is registered with the Council for Estate Agencies, to avoid being cheated by a scam.
Perhaps the advice that stuck with me the most came from Mr Luqman Hakim, chief data officer at property outfit 99.co, who said that the best thing for first-time homeowners is to find property agents not according to their fees but based on their level of experience in closing the sale of a property.
"Deeply discounted flat-fee agents or agencies are susceptible to lapses in giving proper service," he warned.
"The atypical low price advertised does not justify the returns of the typical amount of work and care provided by agents to market and close the property properly."
After speaking with the experts and academics, I realised that preparing to engage a property agent for the first time requires a lot of thought.
While I now have a better idea of what I am looking for in a property agent, the discussion has led me to realise that I may not be ready just yet to take over ownership of our family home.
Still, I know it will happen eventually and I am hoping that when the time comes to make the difficult decision to sell my family home, I'll be well-equipped to engage the right property agent to assist me.