THE National Development Ministry’s draft plan to regulate real estate brokerage includes a radical suggestion to prohibit an agent from acting for both seller and buyer in HDB resale transactions. This is to eliminate scope to subvert the willing-buyer, willing-seller process by demanding commission from the buyer, usually 1 per cent of the price, or to keep the seller in the dark about the best offer if the bidder would not pay commission. The ministry says this is unacceptable, a conflict of interest. Those who have been victims will argue it is worse than that: The practice breeds dishonesty, and it has the perverse effect of making the agent care largely for himself in securing maximum commission. If a practice is liable to bring the trade into disrepute, it should be discarded.
There is no disputing that the public will favour a separation of agent functions. Real estate firms should warm to the idea, too, as it will shore up battered public confidence. Their income derived as a percentage of their agents’ fees will not be reduced if the current fee guidelines are retained in a segregated system. It is anticipated an accreditation board urged on the trade by the ministry will set the fees. Agents might have to contend with the remote prospect of reduced earnings, but better this than to carry with them a collective stigma.
The downside of separating functions is that it could introduce trade rigidities and some inconvenience to consumers. Many a foreign jurisdiction permits an agent to act for both parties, with no incident. That is because rules of licensing and censure set by the realtors’ governing body are clear; they are observed faithfully; and the trade is fastidious about preserving ethical standards. They have the public’s confidence. In Singapore, duality of function has created a problem because ethical standards were never high to begin with, assuming the common run of agents understood the ethics of responsible dealing. The poor image could be improved under proposals to subject agents to a standardised examination and accreditation by the industry board, which in turn will be answerable to a statutory authority which will have powers of censure for ethical and licensing breaches.
If segregation is desirable, it should be legislated. Setting it as an industry guideline will lead to fanciful interpretations and endless disputes. A prohibition is more practical than the ministry’s parallel suggestion of retaining duality but permitting an agent to charge the buyer a fixed fee for the paperwork done. This assumes commission from the buyer is outlawed. But where dubious ethics is abetted by consumer ignorance, having any fee ‘fixed’ is no guarantee against abuse.
Source: Straits Times, 24 Oct 2009