Wednesday, July 16, 2008
REAL ESTATE BUYERS GUIDE: 10 Things Property Buyers Should Know about their Property Agents, Esp for Sg Expats
1: YOUR AGENT DOESN'T REALLY WORK FOR YOUThe first and most important question to ask any agent-Who are you working for?-is deceptively simple and rarely asked by most buyers. Let's face it; if you're like most people the way you'll pick your agent is by calling the phone number given in that classified Ad at the top of the list, preferably a long list for which you can pick and choose. The next thing you know is that you'll spending evening after evening with your agent, who asks about your needs, laughs at your jokes, and sympathizes with your shock at soaring property prices. It's no surprise, then, that you end up thinking the property agent works for you. The fact is, most agents are not really working for the homebuyers - they're working for the themselves. So whatever you tell him may be taken against you. It's best, therefore, to maintain a poker face in your dealing with property agents.
2: YOUR AGENT MAY BE IN A "DUAL AGENCY" SALENo issue is more confusing for buyers than what is called "dual agency". That means that one real estate agency, sometimes one agent, is representing both the buyer and the seller in a transaction. Agents love this kind of deal because it increases the amount of commission they can earn-instead of having to split the usual 1-2% commission with an property agent.
However, dual agency introduces a host of conflicts of interest. Let's assume you're 2 weeks away from completing the sale and the house plumbing bursts. The seller says, 'I'll fix it.' But, you, the buyer says, 'I don't want it fixed because I don't want to buy the house.' The contract says the property will be conveyed in substantially the same condition. But who determines that? Who's the agent going to side with then? Worse still, some agents are representing themselves or their relatives.
3: ALL AGENTS HAVE INCENTIVE TO SEE BUYERS PAY THE HIGHEST PRICE
Let's assume you've opted to use a buyer's agent who has declared no part in the seller's commission. Are your problems with conflicts of interest solved? Unfortunately, not. Unless you've agreed to pay your agent a flat fee for helping you find a home, even buyer's agents are working on commission and therefore have a financial interest to make sure the you, the buyer, pays the highest price possible.
4: AGENTS' PAY IS NEGOTIABLEReal estate agents act as if the 1-2% commission-usually split 50-50 between the buyer's agent and the seller's agent-is carved in stone. Even in red-hot markets, agents may be convinced to discount their commissions in order to close a sale quickly. Another way to get a bargain on commissions is to have several agents bid against each other. This is especially worthwhile when it involves a very expensive property.
5: YOUR AGENT MAY NOT SHOW YOU ALL THE AVAILABLE PROPERTIES HE KNOWS THAT MEET YOUR CRITERIAA few years ago when I was hunting for a property, I engaged this really enthusiastic agent. He got me viewings almost every evening. When I eventually found the property I liked, he told me that there's another similar one on a higher floor. I trusted that the agent was really looking after my interest. I bought that property. I later learned that there's a bigger property going about the same price next door which the agent didn't show me. I later found out that the agent got co-broke commission, on top of the commission I paid him for the property he sold me but not for the other 2 properties mentioned here.
6: DO NOT RELY ON YOUR AGENT FOR ADVICE ON THE PROPERTY
A real estate agent's job is to get you to buy the property he's selling. Period. He's not there to help you see confirm the facing of the sun or flaws in the property. Some agents are plain ignorant, others may be out to mislead you into a buying the property. If you must have an advisor, bring along a trusted friend or relative with substantial experience in making real estate purchase.
7: KNOW THAT THE REAL ESTATE INDUSTRY IS LIGHTLY REGULATEDYou may want to engage a buyer's agent, especially if you're a foreigner and you're unfamiliar with the local real estate market. In which case, you may want to make sure your buyer's agent is working solely on your behalf. Do not assume that there are laws to protect your interest as a property buyer. In fact, the real estate industry is only lightly regulated. It's best to have a proper agreement that spelt out the terms and conditons under which your agent works for you, like a pledge to help you solicit for the lowest price possible.
8: CHECK IF YOUR AGENT IS A MEMBER OF A REGULATORY BODY
Though the real estate industry is lightly regulated, there are some regulatory institutes that have been formed to the oversee fair practices. Check if your agent is a member of such regulatory institutes e.g. the Institute of Estate Agents (IEA). At the very least, it helps to know if your agent has been certified with a minimum amount of training in real estate and knows the proper practices in the industry.
9: YOU MAY NOT NEED A REAL ESTATE AGENT AT ALL
Property agents will want you to think you can't buy a house without them, but in fact it's not that hard to do. There are many websites that carry "for sale by owner" ads or even websites that are dedicated to matching buyers and sellers directly. Once you get started looking at some of these properties, you may find the process more appealing than working with an agent. In fact, you'll find some real advantages to buying directly from the seller, the biggest being the potential for a lower price.
10. YOU ARE THE BEST PERSON TO LOOK AFTER YOUR INTEREST, NOT YOUR AGENT
For sg expatriates looking to buy Singapore property, you may want to know that the common market practice in Singapore is that property buyers do not in general pay the agent's commission, it's usually the seller who pays the agent's commission. An excellent guide for Singapare expats is this booklet entitled Singapore Explorer: The Complete Residents' Guide available at Amazon.
May also want to read:
Quick Way to Calculate Stamp Duty for Purchase of Property
How to Calculate Property Tax for Singapore Property
How to Calculate Rental Yield for Singapore Property