Zero commission? It’s too good to be true

Zero commission? It’s too good to be true

I WELCOME the proposal to regulate property agents (’Property agents to be regulated’, Oct 5).

I wish to highlight an unethical practice of some property agents:

•Some agents put up advertisements claiming they take ‘zero per cent commission’ from sellers. This seems like a good deal for sellers, given that the market rate is 2 per cent commission. But these agents require sellers to sign an exclusive agreement lasting three months. If the seller breaks this agreement before its expiry, a penalty fee of $5,000 is imposed.

•These agents will also not be present during viewing sessions by potential buyers. They will SMS the viewing date and time to prospective buyers, and sellers will be left to handle the buyers and their agents.

•If sellers ask for $20,000 cash over valuation (COV), these agents will ask buyers for between $25,000 and $30,000 COV. If the buyer agrees to the amount, the agent will tell the seller the buyer has agreed to pay commission, and will write the commission amount on the option to purchase form and make the seller sign it.

•These agents mostly will not co-broke as they cannot take commission from the seller, so they have to scout for direct buyers to earn their ‘rightful’ commission, thus prolonging the sale process.

Many sellers often prematurely terminate the exclusive agreement, because of the absence of the agents during viewing sessions and the prolonged sale process.

But if this happens, the agent will lodge a case with the Small Claims Tribunal, demanding $5,000 as compensation as the seller has broken the exclusive agreement. Most sellers do not want further trouble and end up paying the $5,000.

Sellers should not blindly sign an exclusive agreement, no matter how ‘good’ the offer. Remember, there are no free lunches in this world.

Jason Sim

Source : Straits Times - 18 October 2009

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MINDY YONG

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mindy@mindyyong.com

New rules should protect property agents

New rules should protect property agents

I REFER to the recent debate over the regulation of property agents in Singapore (’Property agents to be regulated’, Oct 5) .

As a property agent, I applaud the Government’s plan to set up a regulatory framework for the real estate industry. The proposed framework seems to be protective of consumers. But what about the rights of property agents? Having been in this line of work for three years, I have seen my fair share of how ‘ugly’ this industry can be:

•Clients these days do not give exclusivity to property agents to market their properties. Instead, they take advantage of the resources of the agents who are hungry for their business to market their properties. This is to the advantage of the clients as they get many advertisements and awareness out of this so-called competition among property agents.

•According to Institute of Estate Agents guidelines, clients are to give 2 per cent commission to property agents for closing a private property sale transaction. But because of competition among property agents, they undercut one another by agreeing to a lower commission rate of 1 per cent.

•Real estate agencies take a cut of 10 to 30 per cent from each transaction closed by property agents. Real estate agencies should not do this as they provide little or no support to the agents. My agency is responsible only for issuing invoices after a successful sale or rental transaction. This does not justify the cut they take from our commissions.

The Government should look into the following:

•Standardise the commission rate throughout the real estate industry, so there is no more undercutting among agents. This will protect agents’ right to demand their commission.

•Since real estate agencies already take a cut from each transaction closed by their agents, they should look into the welfare of their agents, for example, by providing basic health and dental benefits.

Chua Khim Leng

Source : Straits Times - 18 October 2009

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MINDY YONG

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mindy@mindyyong.com

Poor service is top grouse against real estate agents

Poor service is top grouse against real estate agents

By Jessica Cheam

UNSATISFACTORY service from property agents is the top complaint consumers have about them, says the Consumers Association of Singapore (Case).

New figures released to The Straits Times show about four out of 10 complaints in the past three years were due to agents failing to give proper advice or to carry out duties for consumers, such as submitting relevant documents.

The next most common type of complaint was failure to honour agreements. This made up 15per cent of complaints from January to September - up from just 3per cent of complaints in 2007.

Misrepresentation of facts forms about 7 to 8per cent of cases each year.

Other grouses from home buyers and sellers include agents overcharging for commission fees, misleading sales tactics and refunds, said Case executive director Seah Seng Choon.

Unclassified generic enquiries made up 16 to 29per cent of cases since 2007.

‘Most of the time, we see cases where the agent failed to provide the necessary information, in one way or another, for consumers to make an informed choice,’ said Mr Seah.

Such information, collected by Case since 2007, gives an insight into the nature of complaints about agents - a timely move, considering public feedback is being sought by the Government on a new plan to revamp the industry.

The Ministry of National Development (MND) announced proposals last week to improve the industry’s professionalism, including setting up a new regulatory authority, an accredited industry body and an independent tribunal for dispute resolution.

The real estate sector has come under scrutiny after earning a ‘cowboy’ reputation in recent years for an increasing number of complaints against rogue agents, which has occurred in tandem with Singapore’s property market boom.

Case received 1,100 complaints last year and 1,055 cases in 2007, compared with just 379 cases in 2002 and 447 in 2003.

Some specific examples of unsatisfactory services rendered included agents not truthfully explaining the sales process, leaving out important documents such as valuation reports, or ‘playing off’ the buyer and seller for commissions, said Mr Seah.

In one case, a seller was asked to pay commission to a buyer’s agent in addition to his own agent, because the buyer’s agent claimed he had forfeited his commission in order to get the buyer to agree to pay a higher price. The seller later found out the agent received commission from both the seller and the buyer.

In another case, one seller, Ms Joanna Mak, a manager in her 30s, discovered that an agent had posed as a buyer and had requested a longer than usual period to exercise the option to purchase for the purpose of ‘flipping’ the property.

Another major complaint that falls under unsatisfactory service or misrepresentation: agents who represent both buyers and sellers, often seen in the HDB resale market.

The practice means the seller’s agent often gets a commission from the buyer as well and may refuse to sell to a certain buyer if no commission can be paid.

This presents a conflict of interest and is so rampant that MND has proposed banning it.

But agents are defending their industry.

OrangeTee assistant associate director Monika Fischer, 50, says clients are sometimes to blame when disputes arise.

Ms Fischer, who specialises in rental homes, said that there are landlords who do not honour contracts signed and in some cases, refuse to pay commissions even after agents find a tenant.

‘Clients also have to honour their contracts. And perhaps we should put a quota on the number of agents allowed in Singapore. Because it is so competitive, agents undercut themselves on fees and resort to unethical behaviour to survive,’ she said.

Source : Business Times - 18 October 2009

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MINDY YONG

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mindy@mindyyong.com

Laguna Park owners mull lower sale price

Laguna Park owners mull lower sale price

By TEH SHI NING

OWNERS of units at Laguna Park, whose $1.2 billion collective sale bid failed last week, are now considering a lower sale price of between $950 million and $1 billion.

At between $950 million and $1 billion, the new price range works out to between $693 and $723 per square foot per plot ratio.

The new range works out to between $693 and $723 per square foot per plot ratio (psf ppr), including an estimated $400 million payable to the state to raise the intensity of the site to the plot ratio of 2.8, and topping up the lease to a fresh 99-year term. This compares to $844 psf ppr at the reserve price of $1.2 billion.

These were some of the numbers discussed at a meeting of about 200 Laguna Park residents yesterday afternoon, called to consider the results of the failed tender and discuss possible options.

Even though two bids had been submitted by the close of tender last Tuesday, no buyer put down payment to seal the $1.2 billion deal.

Credo Real Estate, which is marketing the 528-unit leasehold Marine Parade project, said last week that one submission from an Indonesian-owned, locally incorporated company offered $1.728 billion - above the owners’ reserve price.

But it withdrew its offer on Thursday, citing difficulties faced by its bankers in processing and remitting the funds to Singapore. The only other submission was from a prominent local developer, with whom Credo is now conducting negotiations.

Credo’s managing director, Karamjit Singh, said that the owners now have till around mid-November to strike a deal with a buyer, before the collective sale agreement expires in December.

The sales committee will now need 80 per cent of the Laguna Park owners to agree to what is likely to be a lower sale price than their reserve, in order to close a deal.

Laguna Park has a land area of about 677,463 sq ft. Some 1,500 apartments with an average size of about 1,200 sq ft each can be built on the site.

Source : Business Times - 18 October 2009

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MINDY YONG

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mindy@mindyyong.com

Rich continue to splurge online

Rich continue to splurge online

By OH BOON PING

IT pays to advertise when times are bad - and an effective way to do so seems to be through the Internet.

A survey has found that rich people continue to splurge on luxury goods despite the downturn - and that Internet users spend more than those who are less IT-savvy.

The study by research firm Synovate polled some 20,245 rich people across 12 cities and found that they appeared more ready to spend in the third quarter last year - when markets went into a tailspin - than in previous quarters.

For example, 74 per cent of those polled in Q3 last year said they were willing to pay extra for quality, while 41 per cent were prepared to consider new brands - up from 68 per cent and 36 per cent in previous quarters.

In Singapore, Hong Kong and Taiwan, the rich now own more designer clothes and leather goods than a year ago. Car ownership in Singapore has also gone up, Synovate said. Some 67.1 per cent of the locals polled now have their own wheels - up from 60.8 per cent a year ago.

Similar patterns were seen with IT products such as laptops/notebooks and LCD/plasma televisions.

For example, ownership of notebooks in the region has jumped from 40.8 per cent last year to 48 per cent this year.

Some 57 per cent of rich people in Singapore own a plasma TV, with a further 9.5 per cent intending to buy one in the next 12 months.

‘It is obvious that affluent consumers do not want to give up their quality of life,’ Synovate said. ‘The top places with the highest increase of designer clothes and leather goods ownership are Singapore, followed by Taipei and Hong Kong.’

Across the region, Synovate also found that the rich who are Internet-savvy own more products than those who are not.

For example, 36 per cent of active Internet users go on one or more leisure trips, compared with 14 per cent of those who are less active online.

Some 22 per cent of active Internet users own a luxury watch, versus 12 per cent among those who are not as savvy.

Source : Business Times - 18 October 2009

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MINDY YONG

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mindy@mindyyong.com

Fastest recovery on record is cause for concern

Fastest recovery on record is cause for concern

Sentiment index reaches heady, pre-crisis levels of Q3 2007

By TEH HOOI LING

(SINGAPORE) While the jury is still out on whether the recovery we are seeing today will be ‘V’ or a ‘W’ shaped, investors are becoming as euphoric as they were during the height of the stock market boom in the third quarter of 2007 - which is worrying some market observers.

Last week, International Netherlands Group (ING), a global financial institution based in Netherlands, released its ING Investor Dashboard Sentiment Index for 13 markets in the Asia Pacific.

Almost all Asian countries reported consecutive improvements in investor sentiment during the second and third quarters. But a fact that escaped most write-ups of the ING investor sentiment index was that the index has reached the heady, pre-crisis levels of the third quarter 2007.

That was when the outlook was considered ultra-rosy and the Dow Jones Industrial Index was at 13,895 points, en-route to hit 14,164 points just 10 days later. In Singapore, the Straits Times Index ended at 3,645.41 on Sept 28, 2007, and climbed to a record high of 3,831.19 on Oct 11, 2007.

So has investor sentiment run ahead of fundamentals? Noted a savvy private investor: ‘The numbers suggest strongly we are at, or close to, a short-term top.’

Indeed, according to Citigroup’s Asian equities strategiest Markus Rosgen, the market recovery we’ve seen this year has been the fastest in percentage terms since the inception of Citi’s database in the mid-1970s.

In valuation terms, this has also been the fastest recovery on record, and the one which has discounted the furthest out. ‘The price-to-book value today of 2x finds itself at the same level as year three or four of the last six recoveries since 1970s,’ observed Mr Rosgen in a recent report.

On the earnings front, it was a similar story. Earnings did not decline as much during this cycle as they did during the 2001 cycle, the 1997/98 cycle or the 1980’s recession. ‘So, with markets anticipating a vigorous recovery in the real economy, it is no surprise that earnings revisions have shown the strongest recovery since data began in 1990.’

Earnings revisions, he noted, have moved beyond those that followed the 1990 recession, the 1997/8 crisis, the 2001 recession, and are above both the 2000 and 2007 market peaks.

‘It is hard to see how it is going to get better for earnings revisions from here. In fact, we are starting to see the first signs of downward revisions to earnings,’ said Mr Rosgen.

But the good news is we are entering a favourable period in terms of year-on-year comparisons. This time last year, a lot of economic activities had almost ground to a halt. So it is nearly impossible for year-on-year numbers to get worse in the next few months. Export growth and export prices should be positive from now till early second quarter 2010.

‘But the snag is, at 2.1 times book and 16.9 times mid-cycle earnings, much of that expected improvement is already in the price of Asian equities. Market would need to give some performance back in order to move higher. Negative earnings revisions make it hard to see further near-term upside,’ he concluded.

Daiwa Securities SMBC analyst Tham Mun Hon also noted that the Asia Pacific region ex-Japan has been the first to emerge from the global slowdown. ‘But we believe most of the good news has been priced in and that funds inflow is likely to remain quite weak unless we see a further upgrade of the region’s economic growth outlook.’

Gabriel Yap, senior dealing director at DMG & Partners Securities, however, takes a different view. He believes Asian market valuations are still not over-stretched. The quality of the earnings of big cap stocks is good. Meanwhile, small cap stocks still lag the general market in terms of valuation, he added.

But purely from stand point of market prices, where do we stand today? The Dow Jones Industrial Index crossed the psychologically important 10,000 level last week for the first time in more than a year. Still, it is 30 per cent off its October 2007 peak. Singapore and Hong Kong are about 20 to 25 per cent off their 2007 peaks, while China is still down by a whopping 45 per cent.

But given that we are supposed to have just gone through the worst crisis since the Great Depression, perhaps this is as good as it gets, or can get, one year on.

Source : Business Times - 18 October 2009

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MINDY YONG

( +65 ) 91002985

mindy@mindyyong.com