Sunday, March 13, 2011

When your agent does not act in your interest

OFFERING the highest price for a home does not necessarily mean you will get it. Ms Karrie Choo, 36, discovered this the hard way when she missed out on buying a resale five-room flat on Kent Road in Serangoon.

The reason? Her agent had not been 'chosen' by the seller's agent for co-broking. In co-broking, a seller's agent and a buyer's agent work together to close a deal.

It has emerged that some property agents are finding ways to get around the new rules introduced by the regulatory body Council for Estate Agencies (CEA) to up professionalism.

CEA, which regulates an industry of over 30,000 agents, has banned dual representation where the same agent represents both buyer and seller, since it is a conflict of interest. The agent is also not allowed to collect commission from both sides.

Home buyers said some agents are getting around this by colluding with each other to finalise a deal, even if it is not in the seller's or buyer's interest.

They would pick, say, agents within their own property firm, agents from another firm with whom they are friends, or their own spouse if the latter is an agent, to co-broke with, even if it meant their seller-client might not get the best price.

Some buyers suspect the agents share commissions under such arrangements.

When contacted, CEA said it has had three complaints to date regarding agents 'picking' other agents to co-broke with.

It cautioned agents against such a practice. Those found guilty may face disciplinary action - penalties include fines or revocation or suspension of licences.

It said agents are required to 'submit every offer to their clients accurately, objectively and as soon as possible after receiving it'. It added that agents should not reveal to their clients offers that are only from buyers' agents they are familiar with.

In an HDB transaction, the seller typically pays his agent 2 per cent of the purchase price, and the buyer pays his own agent 1 per cent. In private property, usually only the seller pays his agent, and the commission is 1 to 2 per cent of the purchase price.

Ms Choo, an administrator, said she acted quickly after viewing the Kent Road flat, offering a cash premium of $45,000 above its valuation of $575,000.

She was told it was already sold. Later, checks on HDB's website showed the unit was sold at $40,000 above valuation.

Ms Choo, who has since lodged a complaint with the CEA, said she was very upset. 'I felt the agent didn't do his job ethically as he didn't give the owner all the offers. How is this in the buyer's or seller's interest?' she added.

CEA said it was investigating the case.

Some other concerns have also surfaced among buyers, such as agents who do not declare their close relationship before a deal is done. While CEA rules are not specific to that degree, there is a conflict of interest code which dictates that agents should declare their relationships if it can affect a sale.

Madam L.H. Goh, 51, a personal assistant, said her agent let on that the seller's agent was his wife only after she had signed to buy a flat in Holland Road.

'I do not think he acted in my best interest because he encouraged me to sign a contract that allowed the seller to extend his stay past the sale completion date.'

Such a practice is illegal, according to HDB rules.

'If he was my agent, he should have advised me not to. But he obviously wanted to close the deal because his wife was the seller's agent,' she added.

Agency bosses said they discourage their agents from straying from the CEA guidelines. Dennis Wee Group director Chris Koh said: 'It's in the agent's best interest to declare any conflict of interest.'

He added that agents from the same firm are allowed to co-broke in the same transaction. As long as they do not share commission, they are not breaking the rules, he noted.

Mr Koh said some owners may also have their own reasons for selling at a lower price. 'The buyer could have fewer demanding conditions so it's the seller's prerogative. The question is whether the agent relayed the offer.'

C&H Properties associate vice-president Lee Han Sing said though practices of collusion with other agents exist, the people involved are in the minority. 'Generally, I would say the standards of the industry have improved since CEA stepped in to regulate the industry.'

So what can a seller do after the property is sold and he or she finds out there were actually better offers? Apart from lodging a complaint with the CEA which will deal with the agent, property sources said the seller can also file a civil suit against the agent.

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