Fix commission for buyer’s agent based on ‘bargaining effort’

MS KOH Siew Buay made a good point yesterday in her Forum Online letter, “How we sold our flats without using property agents”.

The current debate over having one agent represent both seller and buyer has often been overshadowed by the discussion of the potential conflict of interest that can arise.

The point is that any seller or buyer can handle the transaction on his own. The law does not compel anyone to use an agent to sell or buy a house. It is probably more effective for sellers to engage the services of a property agent. This is because agents help facilitate the advertising needs of the seller. And it is best if an agent represents only one party.

If an agent does represent a buyer, however, his commission should not be pegged to a percentage of the sale price. This is because a lower price benefits the buyer, but will result in a lower commission for the agent. Naturally, this does not encourage the agent to seek a lower price for the buyer. This makes it difficult, too, for the agent to demonstrate that he had acted in the best interest of the buyer.

If an agent represents the buyer, his commission should preferably be fixed in a manner that rewards his effort at getting a lower price for his client.

Patrick Sio


Source: Straits Times, 17 Oct 2009