Friday, February 20, 2009

Time for professional body to regulate real estate industry

TUESDAY'S report, 'The murky world of real estate practices', encapsulates the morass in which the real estate industry finds itself in. Sad to say, all is not well in the industry and relief is not yet in sight.

As the Institute of Estate Agents (IEA) has no power to keep errant agents out of the industry, it is akin to a toothless tiger. Currently, estate agents handle both HDB and private property transactions and many buyers and sellers depend on them for their services.

The complaints committee of the Singapore Medical Council handles all complaints against doctors and this is governed by Section 40 of the Medical Registration Act 1997. Disgruntled patients have recourse to voice their grievances against doctors who indulge in any malpractice.

Why is there no recourse for real estate transactions that have gone awry?

When an owner appoints an estate agent to market his property, a relationship of agent-principal is established. This is called power of attorney. Such a relationship plays an important role in the real estate business. Even if the agent is fired or he quits, the agreement does not automatically end.

The agent can still have lingering apparent authority since various third parties may remain unaware of the termination of the relationship. To ensure that the agent does not act beyond his authority at the end of the relationship, the principal must be sure to give notice (via the newspapers) that the individual is no longer his agent.

In California, its 400,000 estate agents (called realtors) are governed by a code of ethics. They have to pass a course on the legal aspects of real estate, general accounting, business law, escrow (a document kept in the custody of a third party), mortgage loan brokering and computer application in real estate.

A realtor is obliged to safeguard his principal's lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. This duty precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must sell a property (under pressure by banks) below the listed price. Conversely, a broker who represents a buyer should not disclose to a seller that the buyer will be willing to pay more than what has been offered for a property.

Since 1924, the Real Estate Institute of Australia has been the national professional association of the real estate industry in Australia. The institute is a politically non-aligned organisation that provides advice to the federal government. It has a stringent code which specifies, inter alia, that members must maintain a working knowledge and act in accordance with the relevant laws governing the real estate profession, act in the best interests of their clients and in accordance with their instructions, except where to do so is unlawful or contrary to good agency practice.

They must treat fellow real estate practitioners with respect and professional integrity and should not disclose confidential information obtained while acting on behalf of a client or dealing with a customer, except where required by law to disclose.

Perhaps Singapore's Parliament should introduce legislation to set up a professional body like the Australian institute which has powers to discipline its members and uphold the professional integrity and reputation of such an august body.

Heng Cho Choon

Source: Straits Times Online Forum, 20 Feb 2009

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