Property agencies ink MOU to adopt co-broking best practices, resolve disputes
Jessie Lim
THE real estate industry is moving to standardise co-broking arrangements, to ensure property agents are fairly remunerated according to best practices when they work together on the same deal.
On Tuesday (Nov 14), the Singapore Estate Agents Association (SEAA) inked a memorandum of understanding (MOU) with 16 leading property agencies to adopt these best practices from July 2024.
Currently, there are no laws or industry norms governing how property agents are remunerated; buyers are not required to pay their agent a commission, unlike in many other countries.
This means the buyer’s agent has to negotiate with the seller’s agent if they choose to co-broke and share the commission. Co-broking refers to a situation where two or more salespersons, representing different parties in a transaction, work together to complete the deal.
SEAA president Adam Wang said: “This creates a potential conflict of interest, as the buyer’s agent is now in the dilemma of deciding to put their buyer’s interest first or protect their commission. The same applies for rental transactions.”
Disputes have also risen over whether the buyer’s agent should be paid, and how much, Wang said.
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To resolve such disputes, SEAA is advocating for property agents to go through mediation and arbitration schemes, which it will be offering in partnership with the Law Society of Singapore.
Wang said: “When a commission dispute arises between property agents, especially when you are from different agencies, it is sometimes difficult for both the agencies to handle (the dispute) on the salesperson’s behalf as a large part of the commission goes to the agents and their stakes are higher.”
The mediation and arbitration schemes are expected to help property agents save time and costs, as well as achieve better outcomes for disputes they encounter, he added.
Under the best practices guide laid out by SEAA, property agents should agree upon how commission is shared before engaging with clients. Agents should collect commission from the party they represent.
In the event that clients do not want to pay a commission to the agent representing them, they may request for a co-brokerage fee from the agent representing the other party.
Agents must also prepare a co-broking agreement if they decide to share the commission. It is illegal for agents to receive a commission from both the buyer and seller in a transaction.
The 16 property agencies that signed the MOU include PropNex, ERA, Huttons Asia, OrangeTee and SRI. They represent 88 per cent of the total number of property agents in Singapore.
While the MOU is not binding, Wang told The Business Times (BT) that the agencies will be educating their salespersons to always attempt to collect commission from their own clients first, and inform their clients about the benefits of paying their agents directly.
Lim Yong Hock, key executive officer (KEO) of PropNex, said aligning the guidelines for co-broking is a positive move, but there are limitations. “It might not be a smooth-sailing road ahead, because as long as the guidelines are not mandated by the authorities, it will still be down to market forces to determine some of the practices around co-broking commission,” he said.
OrangeTee & Tie chief executive officer Steven Tan said the agreement will help parties have a common understanding and clearer expectations of co-broking, reducing the number of disputes.
ERA KEO Eugene Lim said: “We are optimistic that all agencies will eventually adopt these best practices and work together with one another.”
Addressing an audience of about 200, including real estate leaders, at the MOU signing on Tuesday, Minister of State for National Development Faishal Ibrahim spoke about some of the challenges the industry faces, such as property scams and the risk of properties being used for money laundering.
He said: “While we cannot completely prevent people from trying to abuse our systems, your contributions and effort go a long way in detecting and stopping them right from the start. This is a very powerful deterrent.”
The industry is also working towards tackling the long-standing problem of dummy, unauthorised, inaccurate and duplicate property listings, he added.
SEAA’s Wang told BT that the association, together with the five largest property agencies and major property portals, have been developing a digital platform to verify listings before they can be published on property portals.
A prototype for the platform is being developed and tests will be conducted from this month, he said.
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