There has been much talk about whether a real estate agent is truly necessary. With information technology at the forefront of whatever we do, some home owners and home buyers are opting to deal without a real estate agent. This potentially saves them thousands of dollars in commission. There are also many applications and websites that try to match individual sellers and buyers. Statistically the number of do-it-yourself (DIY) transactions is rising. This increase is more profound in HDB transactions.
So why then do you need a real estate agent?
1) For convenience
Imagine having to advertise your property for sale and then having to entertain the influx of calls on your personal mobile phone. After which you will have to try to arrange the various buyers to come to your property and after they have viewed the property you will need to make follow up calls to try to get offers coming in for your unit. If you had a property agent acting for you, you could leave the advertising to him, let him deal with the calls that come in and get him to arrange viewings to suit your timing. Most buyers are more comfortable voicing their concerns about a property to a property agent rather than to the home owner directly. These concerns are valuable information which your property agent can then communicate to you and from there you can gauge the level of interest and whether your property is appropriately priced.
Some sellers may find that to pay a property agent a transaction fee of 2% for selling their property is rather expensive. To get professionals to paint a house is also rather expensive if you compare it to the cost of paint. Some people may be fine with getting their hands dirty. However most would rather pay professionals to get a paint job done. These professionals do it for a living on a daily basis. They can do it faster and more efficiently. This is the same as hiring a real estate agent to handle a property transaction.
2) You pay for expertise
The paperwork to get a deal done is not extremely difficult. However I would like to remind those who think that it is mere child’s play that this is not the case. I have encountered DIY home sellers who sold an option to a buyer and did not realise that certain terms of the option were detrimental to him. When asked where he got that particular option from, he stated that he got it from a friend who used that in his property transaction. The problem was that his friend hired a property agent to represent him in his purchase of a property and had negotiated the terms of the option to favour his client. The DIY home seller had sold an option with extremely favourable terms to the buyers of his property. The particular term was pertaining to the Law Society of Singapore’s Conditions of Sale. He had also not consulted the help of a lawyer to draft an option as hiring a lawyer to do so would cost him money. Eventually the buyer decided to take advantage of a clause in the option and the seller had to fork out tens of thousands of dollars to fulfill this particular term in the option.
If he hired a good real estate agent to represent him in this particular sale it would have cost him a lot less to pay commission rather than the tens of thousands to rectify the situation. Real estate professionals do have the relevant knowledge as to what to look out when dealing with various real estate transactions. Moreover, real estate agents need to purchase professional indemnity insurance as mandated by the Council for Estate Agencies (CEA). This means that if such a situation were to arise even though you hired a real estate agent and if the real estate agent was truly negligent, you can claim against him and his professional indemnity insurance. A professional indemnity insurance ensures that clients are truly protected as claims will be paid out by the insurer.
3) You pay for experience
Being long in the line means that your real estate agent knows some things which you don’t. I once heard a real estate agent recommending a certain stack in a new development because those particular units offered a “pocket of sea view”. The development was not yet built and yet the real estate agent, through him walking the ground and analysing the plan of the development, was able to advise his clients of the possible advantages of certain units. A good and experienced real estate agent can help you to make the right decision. The property that you bought through him may end up having a much higher value as a similar unit in the same development.
An experienced real estate agent will also be able to tell you whether the market is picking up or not. These are the people who walk the ground on a daily basis. By the time statistics are released, the market may have already turned and an opportunity might have already passed.
4) The online portals are not truly DIY portals
The portals that are out there have got it wrong. In today’s day and age you need a DIY portal to be informative to catch on. Most DIY portals are focused on merely linking buyers and sellers. Some even charge a fee for using their portal! This seems counter-intuitive when the people who are using the DIY portal are doing so because they want to save money. Essentially a real estate transaction is perhaps the largest financial transaction most people will make in their lifetime and to trivialise the transaction as something that can be done by just about anyone is not the right thing to do. In my personal opinion the DIY portals are focused on monetising the portals rather than empowering clients who want to do a DIY transaction.
So then here are a few myth busting facts.
“I can sell the property myself!”
Yes you can. However will it be at a good price. Just about anyone can sell a property if price did not matter. Time after time we hear of sale records being broken and about the real estate agent who brokered the deal. Truth be told the paperwork is not that difficult, just like selling a vehicle. There is a large amount of paperwork to be completed but it can be done if one decides to go through it thoroughly. However there is more than just paperwork when it comes to selling a property. Negotiation plays a large part in a property transaction and property agents who are long enough and committed to their profession can help you achieve a very good price for your property. At times the positive price difference that a property agent can achieve is much more than the commission you are paying him.
“It is so simple. An agent’s fees are too high for the work they do.”
Well then a lot of people do work in their day job and they get very little work done in the day as well. Does that mean that their bosses can not pay them for the month? If a sink leaks and you have to change a tap would you do it yourself or just call the plumber. It is easier to find out how to change a tap than it is to find out how to draft a proper option that is favourable to a home seller.
“I can easily get the buyer. I will just advertise myself.”
A lot of times buyers purchase properties through the recommendation of their real estate agent. I encountered an extremely wealthy lady who sold off her detached house and wanted to purchase a 5 room HDB flat. She did not look at any advertisements at all and relied on her real estate agent to look for a property for her. A lot of deals are transacted with fellow real estate agents or co-broke agents. These deals are concluded by agents reaching out to each other through outlets like SMS or emails. Just because someone does not trust the service of real estate agents does not mean that others feel the same. Many people still depend on real estate professionals for their recommendations.
“Real estate agents are not professional.”
Well on the contrary. Since the Council of Estate Agencies was set up, the barrier to entry for real estate agents has increased substantially. On top of having to pass examinations to obtain a license to practice, real estate agents have to undergo Continuing Professional Development (CPD) courses. At times these courses are conducted by individuals who are legally trained and thus your real estate agent can point out certain things you may be unaware of when you undergo a property transaction. Real estate agents are also educated. Not everyone can become a real estate agent as the minimum qualification to become one is to have 4 ‘O’-Level credits. Some degree holders have also opted to join the industry.
“Real estate agents make a lot of money.”
Yes. The top ones do. However it would be wise to understand that there are a lot of costs involved. Advertising can take up a significant chunk of earnings. In some cases even up to half of the commission earned. Advertising on online portals and print media is not free and advertising bills can tally up to thousands of dollars a month if the real estate agent advertises aggressively. How else can he get the maximum exposure for a property to achieve that record breaking price? On top of that, prospecting methods like flyer distribution and telemarketing do not come cheap. Being self employed would mean that there is no employer’s CPF contribution and health insurance or company medical benefits. Yes your real estate agent may be making good commission on the sale of properties, however there are a lot of hidden costs which are not obvious to the general public.
“I want to save money.”
I understand but how much is your time worth? Your time may be better spent on other activities rather than worrying about the attractiveness of your advertisement or negotiating with a buyer to match your price. I find it perplexing that individuals do not put a dollar value to the time that they are spending. Your time can be better spent enjoying with your family or undergoing a personal development course rather than dealing with a transaction which you may not do very often.
So then where do we find common ground? In most cases I would think that hiring someone good to aid you in a property transaction is essential. Saving on commissions may mean that you may lose out on a good deal. So how do you spot the right real estate agent for you?
1) Interview a few property agents
Take your time to understand a few property agents and ask for their track records. Take a look at the properties they are currently listing and ask them how they intend to market and price your property. The common mistake that home sellers make is to go with the real estate agent that promises him the highest listing price. Personally I would pick the real estate agent that you find most comfortable with. You want a pleasant, welcoming and professional real estate agent to represent your property. Since an exclusive is usually for 3 months, it would be good to work with someone whom you can communicate well with.
2) Look for a full time agent
My personal view is that a full time agent can offer a higher level of service most of the time. A full time property agent is someone who does not have a day job whereby he is answerable to a boss. Imagine being in a meeting and not being able to answer a phone call from a prospective buyer. That is not to say that all part time agents are dispensing poor service. There are a lot of extremely proficient part time agents as well.
3) Look for someone who has been in the real estate line for many years
Or at least make sure that if you hire a rookie he has someone to guide him in your real estate transaction. Being in the line for a longer period would generally mean that that particular real estate agent would have more experience. He would also have been through some property cycles to know the tell tale signs of where prices are heading. It is such invaluable information which may help you make a more informed selling or buying decision.
4) Look for recommendations
Know of a friend or relative who recently sold their property? Ask them about their agent. If the experience was a favourable one, you may want to meet up with their agent to discuss about your real estate needs. Most real estate agents know that referrals are the most cost effective way to procure new business and thus do strive to do a good job in every deal they handle.
5) Last but not least, look at the agent’s profile
Almost all agents have at least a webpage or a Facebook business profile. Some even blog about real estate articles to keep in touch with clients. All these can aid you in making a decision to hire the correct real estate agent for you. Read up a little about the agent you are about to hire.
Dealing with real estate is not simple nor is it rocket science. Some may find it easy to handle their own transaction without a real estate agent while many will find that it is easier to just leave it to the professionals. Real estate agents should not be too flustered when a new DIY property portal comes about. Instead they should hope that these portals properly educate and empower those with the relevant knowledge to properly transact without a real estate agent. There have been instances whereby sellers or buyers who were not represented by real estate agents messed up a transaction. I personally believe that there will come a day when someone will get a DIY property portal right and it should come from within the real estate profession as these are the people with the knowledge to do it right.
Yours Sincerely,
Daryl Lum
p.s. I have been in the real estate line since 2004 and this article was written to give my personal view on whether clients should hire a real estate agent or not. This was written in light of the recent proliferation of DIY property portals.
