ST : Getting smart against rogue housing agents

May 26, 2010

Getting smart against rogue housing agents

Teaching buyers and sellers about their rights is the right move

By Tan Hui Yee

A HOUSE hunter finds a property she likes and tries to bargain down its price. The seller's housing agent tells her: 'I can make it cheaper, if you pay me a commission.'

Years after the public outcry over this double dealing, a home buyer encountered the same situation two weeks ago. The agent collected fees from both the buyer and seller in the same transaction, raising questions about which side he was working for.

Despite the obvious conflict of interest, the industry has been divided over the practice. Eager buyers have had no choice but to pay the toll. But not for long.

The Government will likely outlaw the practice under its new regulatory regime to be introduced in a Bill in Parliament in the second half of this year.

The details are still being worked out, but what has been unveiled so far is impressive. There will be a new statutory board to oversee the real estate landscape. A central registry will track disciplinary records as well as awards received by housing agents and there will be mechanisms to investigate and discipline errant agents and agencies.

The proposed regime is an acknowledgement that the market cannot regulate itself in the absence of savvy consumers and sufficient information.

For years, buyers or sellers who felt aggrieved over their agents' actions have been limited to seeking help from three parties: the Consumers Association of Singapore (Case); the Institute of Estate Agents, a trade body; and the Singapore Accredited Estate Agencies, an accreditation outfit.

Each entity was ineffectual for different reasons: Case had no means to haul errant agents to the table, while consumers were either sceptical or unfamiliar with the latter two.

On top of that, the effectiveness of having two agencies was undermined by the ability of rogue agents to move freely from one agency to another.

The new regime promises to close such loopholes. Allegations of misconduct will be investigated by the dedicated statutory board, the Council for Estate Agencies, and agents face warnings, fines, suspension or debarment if found guilty.

Disputes, meanwhile, will be mediated. Agents fingered by consumers for unsatisfactory work will be compelled to attend talks to work out a settlement. If that fails, the cases will undergo adjudication, where a neutral party will decide on a binding outcome.

Still, consumers who have been waiting since last year for this new regime have many yet unanswered questions: What constitutes misconduct? What is unethical and what is merely bad service? What sanctions will agents face?

While upcoming regulations should give clear answers soon, they cannot provide iron-clad protection.

This is because a large portion of complaints to be filed with the new statutory board will likely end up being mediated or adjudicated.

The nature of the industry is such that agreements, save for the actual sale of a property, tend to be verbal. Some agents promise that a sale is financially viable but deny that when the property sellers run into trouble; some owners raise their reserve price the minute their agent secures an offer.

The arrangements turn even more informal when property deals involve consumers who have little education and do not speak English. These consumers rely on agents to translate complex housing rules. The truth is, without proper documentation, it often comes down to the agent's word versus the consumer's - which makes either version impossible to prove.

Under the new regime, such inconclusive cases will likely be routed to Case or the Singapore Mediation Centre for resolution. But such options come at a price.

The actual fees for resolving property disputes have not been fixed but we can get a rough gauge from the current charges. Case levies a minimum of $15 for a session, while the Singapore Mediation Centre, which deals with larger disputed sums, charges an administrative fee of $250 and at least $900 per party per day of mediation. Adjudication, which is currently used in the construction sector to settle payment disputes, is likely to cost more.

Not every agent who misleads a client into an unsavoury deal will be disciplined; some could merely be made to forgo part of their commission in a mediated settlement.

So even with tough laws, not every consumer misled by an agent will see satisfaction. The consumer will also have to commit both time and money to get his grievances addressed, in however small a measure.

This is not a bad thing in itself. The Ministry of National Development states that public education will be a key focus of the new statutory board's work.

While one would expect it to roll out preventive education measures, a dedicated and compulsory dispute resolution process will also teach buyers and sellers about their rights in a way that blind exhortations cannot.

Consumers will learn, through this participative process, the importance of documenting agreements. They will learn not to blindly entrust their financial future to random property brokers. And they will learn that no amount of rules can protect them if they do not learn to protect their own interests.

When regulations were lax, the costs of pursuing justice were onerous. Few buyers or sellers have the resources of home owners like Mr Yuen Chow Hin and Madam Wong Wai Fan, who last year won their civil suit against housing agency ERA Realty Network over the misconduct of its agents.

The new regime essentially lowers the barriers to consumers seeking recourse. It gives them the necessary tools to learn about and protect their own rights.

That, ultimately, could be the strongest safeguard against unethical behaviour in the real estate industry. For no one can keep agents in line better than savvy consumers who know how to say no to double dealing and just when to blow the whistle.

tanhy@sph.com.sg