Wednesday, July 22, 2009

Let's have a real estate relay

Two groups vying for regulatory clout can complement each other

THE race is on.

Four months after National Development Minister Mah Bow Tan declared current real estate regulations untenable and hinted at mandatory standards for housing agents, the two factions in the industry are vying for regulatory clout.

On one side is the Singapore Accredited Estate Agencies (SAEA), which provides voluntary accreditation in what some have termed a 'cowboy' industry. On the other is the Institute of Estate Agents (IEA).

Since Mr Mah's announcement in March, both the SAEA and IEA have met the authorities separately to argue why each is best placed to provide the industry with regulation.

Last Friday, the SAEA announced new initiatives to get more agents accredited, and the IEA responded by saying that it was unveiling a new entry-level course for property agents.

Given the rivalry between the two bodies, working out a new real estate regulatory framework would require egos to be carefully handled.

Yet there is no running away from the facts: Years of emphasis on 'self-regulation' has not changed the situation substantially. The market has not matured; consumers are none the wiser. The number of housing scams have not receded; they have merely changed with the times.

When the market was buoyant, it was common to hear of housing agents brokering transactions that inflated the price of a flat to help buyers obtain larger loans than they merited. Now that prices are depressed, we hear of deals to under-declare the price of flats so that sellers who had used their retirement savings to pay for their properties need not refund the full proceeds into their account.

Some may point to the increasing number of agencies getting accredited to argue that the current system is making progress. But these numbers tell only part of the story.

The number of housing agencies accredited by SAEA has risen from 161 in 2006 to about 300 now. From 2006 to June this year, the SAEA handled 212 complaints, of which 39 per cent were referred to the accredited agencies involved for settlement. In the meantime, the IEA, whose membership has doubled since 2007 to 2,000, received 324 complaints from 2007 to 2008.

All these numbers are dwarfed by the number of real estate-related complaints that the Consumers Association of Singapore (Case) gets each year. Consumers made 1,100 complaints last year, 1,113 in 2007, and 991 in 2006.

In other words, consumers either do not know about the industry associations trying - but without authority - to regulate their players, or they do not trust these associations to give them a fair deal.

The picture gets more complicated when we examine how companies currently deal with attempts at regulation. Large housing agencies usually park their agents in two subsidiary or related companies. When new industry standards are introduced, the subsidiary which has agents with higher qualifications is submitted for scrutiny. The seal of approval awarded to the subsidiary, however, is often mistaken as a sign that the entire company has passed muster.

Hardly anyone bothers to ask if the agent they are dealing with is accredited because most do not look beyond the logo of the property group on a housing agent's name card.

One can think up many ways to plug this loophole, but they do not address the key problem: that individual housing agents are not licensed. Someone who signs up with an agency is allowed to sell homes almost immediately.

In theory, the Inland Revenue Authority of Singapore licenses housing agencies, which in turn are supposed to keep tabs on the agents who sign up with them. In practice, few agencies have the guts to sack an unethical but high-performing agent.

The average Singaporean would probably demand that the Government should step in to license agents itself. But that would be too daunting a task given that there are close to 30,000 agents in the market. Setting up a government regulatory framework from scratch would be a waste of resources when there are industry players who are willing, and able to do the job - if only they are given enough teeth.

As it is, the three-year-old SAEA is trying its best to prod agents to take the Common Examination for House Agents and the lower-level Common Examination for Salespersons. But it has thus far accredited just 6,000 of the 30,000 individual agents in the market, because accreditation is not compulsory.

The IEA tries to keep its house in order by maintaining an online registry of agents from 360 participating companies and plugging its new entry level course on marketing and ethics.
Rather than reinvent the wheel, the Government might arm the industry groups by making regulation compulsory. It can set the broad parameters of regulation but let the industry groups handle the details.
But for this to work, we must deal first with the rivalry between the SAEA and IEA. Although both run programmes that overlap somewhat, they complement each other in many ways. The former, after all, is mainly an accreditation body for real estate companies, while the latter deals with agents on an individual basis.
It is not difficult to imagine the two bodies working seamlessly together to regulate agents, if the authorities play matchmaker and throw in some carrots for good measure.

With a little patience, the race between the two can be turned into a relay. And thousands of consumers out there will have one less worry when trying to buy or sell a home.

Source: Straits Times, 22 July 2009

No comments:

Post a Comment