TIGHTENING PROPERTY AGENTS

The recent property "flipping" case (Secret Profits) by agents Suit 137/2008 had caused a lot of anxiety and speculation!

1) New and old agents with little educational qualification are worried sick that the Govt will make it compulsory for all Real Estate Agents to hold a "PHD" before they can practice!

2) May be the Govt will insist that agent should have a minimum of 3 years experience working under a qualified senior before he can go "solo" to become a qualified professional agent!

Before we jump to a conclusion, let’s put the whole issue in proper perspective first.

What are the problems that the Govt wants to solve? 

From the various complaints reported, we can list them down one by one here:

1) The complaint that many agents are doing the same "secret profits" practice as allegedly echoed by some defendants in the recent case. 

The agents involved had claimed that it is a common practice in their agencies and in the industry. They do not think that it is wrong.

What those agents probably had in their mind when they said that, I guess, was about "sub-sale" or "reselling".  Just as any property investor will do - buy the option; take the risk hoping to sell at a higher profit! Anything wrong with that?

Speculators with dipper pockets would buy a property to re-renovate it first before offering it for sale.  Is there anything wrong with that?

Others like the "Developers" will want to take greater risk to buy "en bloc".  They rebuild and then sell the new units and new development at "sky rocking" price! Is there anything wrong with that?

Looking it this way, it is certainly nothing wrong in "re-selling", taking the risk to buy the property first hoping to make bigger profits. Though sometimes the situation can become unhealthy – too much of speculation.

But Sellers cannot scream at them (Speculators) or shout at the Agents for cheating or making secret profits! (Many of those speculators are also agents)

If the speculators buy now but end up having to sell at a loss, they too cannot blame the agents or anyone for their own bad judgement. It will be a case of "secret losses". Who cares? They really cannot blame the brokering agents or the agency for asking them to pay a price above market average!

It is also like “flipping” for profit. Sellers will just ask for the price; Buyer will have to decide to take it or leave it!

In the case that created this pandemic issue. Agent Jeremy’s point was that the seller knew that the buyer was likely to sub-sell the property because of the words “or nominee(s)” appearing in the option form. He is correct except that he did not discuss with the owner (who is also an experience agent before) of such possibility.

 The problem arises when agents are also doing “re-selling” of their client’s property. They take the “risk” in buying in first and selling it later hoping to make a” kill”. Obviously in such a situation, agents are in a special position to flip a sale for their own benefits, as in the ERA case. The agents are even able to sell an option for a property which they had actually no legal right to enforce – they had contracted with the second buyer one day BEFORE they exercised the option with the first owner! Anything wrong with that? Oh Yes!

If the agents had disclosed their interest to do a “sub sale” with the approval in writing from their clients and that sub sale happened only after they had legally bought the option, it is more acceptable. But again, such arrangement is open to the same abuse.

Agents therefore should never be involved. Just as in the legal profession, Lawyers are not allowed to be a realtor at the same time.

The ERA case is tinged with obvious failure on the part of the agents amounting to not discharging agent’s fiduciary duty. The agents and agency involved had actually found a buyer who was willing to offer to buy at a much higher price within their marketing period.  It was pointed out by the Judge that the Agent had failed or rather he had concealed the higher offer, depriving the owners of the profit for the benefit of his own friend (his boss).

The material evidence lifted out by the Judge is this: “It also transpired that Natassha (the buyer) had granted an option to purchase the flat to one Teo Su Kee on 18 July 2007 for the price of $945,000. Teo Su Kee exercised his right of option on 25 July 2007, the day before Natassha (the wife of the Agent’s boss) exercised her right of option granted by the second plaintiff - acting in conflict of interest, or obtain any secret profit.

The Learned Judge correctly pointed out that the arrangements made and carried out by the agent in collaboration with Mike and his wife Natasha (wife of the agent’s boss) in the transaction depended on deception.

OK. Given that the Agent and his agency’s practice are wrong, what is the root of the problem? What is it that the Govt want to do to prevent from happening again?

1)    Was it because of the educational qualification of the agent? No! No! NO!

2)    Was it because of the inexperience of the agent? NO! NO! NO! NO!

3)    Was it because of the size and reputation of the agency? NO! NO! NO!

Will enforcing on the minimum education, experience and reputation of the agency really help? Again, NO! NO! NO! Doing all those three things will be a mockery of the case!! Another 10,000 agents may be out of job!

My suggestions are these:

          COMPULSORY EVIDENT OF MARKET VALUE

1)    If we want to ensure that sellers are not deliberately kept in the dark about the actual market value or price of their properties, what we need to do is to make it compulsory for agents to provide evident of latest and ACTUAL TRANSACTED PRICES of comparable properties to the owners.  This is not difficult. Anyone can download and print such information from URA website.

COMPULSORY DISCLOSURE OF ALL OFFERS IN WRITING (REPORT)

2)    Make it also compulsory for agents to disclose every offer that is made and known to the agent during their term of service. Even if the offer is far below their (agent and owner’s) expectation. You never know that the owner is in an urgent situation to let go his property because of important constraint on his time.

COMPULSORY FOR USING A STANDARD ELIGIBILTY TO SELL/BUY CHECKLIST

3)    This is most important in ensuring that agents and owners are aware of any requirements and problems before they enter to sell or buy the property. It may look very efficient and professional when an agent could simply bring a “string” of prospects to view a property immediately just after calling up the owner – without even checking OWNERSHIP and BANKRUPTCY, let alone checking whether the property can be sold in the first place!

The speed (fast) and simplicity (no checking) by many agents have given the public the wrong impression that agent’s role is simple, easy and unnecessary! Many owners believe that they can do it themselves!

If it is that simple, then the Govt and the relevant Authorities governing Property Agents should not impose that agent must be so qualified and must take this and that professional courses! Why make it so stringent if the job of an agent is merely a “matching” service? It will be a mockery of our ability to make sense!

4)    MARKETING PLAN

It will be good if agent can provide owner a marketing plan and strategy to show how he is going to market the property including the minimum number of one (1) advertisement in a week.  This will make owner realise how much effort and money an agent has to put in! Is 1% commission enough? Negotiation is open! If the agent could sell it even before he starts his marketing plan, it only shows that he has ready buyers! He saved himself the expenses. Owner should not complain or cut his commission.

5)    ACCREDITION & CCONTROL OF AGENTS

As with any other Associations – the people who formed the associations had their own vested interest!  They are always fighting for positions and powers. They have good business reasons of course! .Which “big names” want to be under the control and supervision of their competitors! They could be simply out of business if the agency faulted under the rules of accredit ion! As regard to this relevant case, will ERA be struck off and banned if they were under the jurisdiction of IEA?

It is high time the Authority should come in and set up a National Association whose members of the Board must not have personal vested interest in the real estate business. They can come from URA, LTA, HDB, Inland Revenue, Academy of Law etc.

It is important to know the cause of the disease and cure it with the right medicine and prevent it from happening again with a good screening health check! Will this help?

When the time comes forall  property agents to at possess at least the minimum CES certificate, many good and experienced agents who are without certificate will be inevitably forced out of business! This is sad.

In that case, why not become my Referrer/assistant?  50% referreal fee! But with the following conditions:

1) You must attend and complete my "Verification Workshop" training (FREE) and adopt the use of my checklist to qualify sellers and buyers before accepting their case.

2) May be bear 50% of professional insurrance premium.

3) Others (we shall wait for the announcement and guidlines from the authority).

Interested? call to register early. Be my colleagues!