Saturday, May 8, 2010

Towards better property agents

New regulations include higher entry level and mandatory examination

TOUGH new rules for property agents are likely to make it harder for people to quickly switch careers and jump into the real estate market when it turns red-hot.

The upcoming regulations will raise the entry barrier far higher and so deter agencies signing up new sales staff - full or part-time - at a moment's notice.

The rules announced on Thursday will require Singapore's 25,000 or so agents to register through their firms at a new statutory board called the Council for Estate Agencies.

They will also have to pass a mandatory industry exam and undertake continuing professional development of six hours a year. Agents will also need to have four GCE 'O' levels.

This is a sea change. There are now no educational requirements and no mandatory exam, so anyone - from housewives to executives - is able to easily try his luck as an agent.

'Those who may want to make a mid-life career switch into property won't be able to do so if they do not have the four Os,' said ERA Asia-Pacific associate director Eugene Lim.

The buying and selling of property is probably a person's biggest investment and all deals involve paperwork, so this new rule will protect consumers, he added.

Existing agents will be exempted from this educational qualification criterion and those who have passed an industry exam will not need to take the new test.

The new rules - they will kick in once legislation is introduced in Parliament in the second half of the year - will outlaw an agent representing both buyer and seller in a transaction.

Some agents dealing in HDB flats may see a drop in their income if they are not willing to co-broke, said C&H Realty managing director Albert Lu.

Agents representing the buyer and the seller in the same transaction is a widespread practice in the HDB resale market, even though there is a conflict of interest.

Such agents collect commissions from both the seller (usually 2 per cent) and the buyer (often 1 per cent) if the buyer does not have an agent, said Mr Lu.

Agents handling rental deals who are not willing to co-broke may see a drop in income of up to 50 per cent, he added.

These agents usually charge the landlord a commission of one month's rent for a two-year lease and the same commission for the tenant if he does not have an agent.

The new regime is in response to rising complaints against errant agents in what some have termed a 'cowboy' industry.

Dodgy agents have been known to rejoin the industry right after getting out of jail for fraud but this will be impossible under the new rules.

Agents will also not be able to represent more than one agency and will have to wear a standard agent identification card when on the job.

And a public registry of real estate agencies and agents will be set up so that consumers can check on a particular agency or agent. The registry will list any disciplinary action taken over the past three years but it still may not be enough.

ECG Property Group's chief executive Eric Cheng said: 'All the agency bosses will have to work together to police the industry.

'A lot of cowboys are still in the industry. The new rules will help improve the industry but it will not clean it up. There must be constant improvement.'

The impact of the new rules may be felt more when they are clearly defined and in effect, said ERA's Mr Lim.

Industry experts say the ranks of agents will not shrink considerably, though there will be dropouts.

About 10 to 20 per cent of agents may retire within two years if they are not up to the mark as the new rules will require them to take an exam, said PropNex chief executive Mohamed Ismail, who is also president of the Institute of Estate Agents.

Agents who have not passed any existing industry exam will have one year after the start of the new exam to pass it.

'The whole idea behind the new rules is to remove those who don't fit the bill or who don't behave,' said Mr Lim.

About 1,700 agencies with 20,000 to 25,000 agents deal in HDB and private homes.

Knight Frank's managing director of residential services, Mr Peter Ow, said: 'The framework is a good start. The impact won't be felt immediately but perhaps over a four-to-five-year period. The standard of the industry will improve.'

Source: Straits Times, 8 May 2010

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