Singapore real estate agent’s commission: how much do you have to pay?

A good real estate agent well deserves their commission, but many buyers and sellers are often not sure how much to pay. Landlords and tenants alike.

The truth is that there are many factors that determine the commissions of real estate agents in Singapore; even seasoned sellers, buyers and renters can become confused about industry standards.

Here is a guide to help you be absolutely sure about the commission you need to pay on any type of real estate transaction, whether it’s selling, buying, or renting.

To understand real estate agent commission in Singapore, you first need to know that there are two types of agents.

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AGENT OF THE OWNER / SELLER

This is any real estate agent appointed by the owner or the seller to market a home. This agent:

  • Develops a strategy for promoting and presenting the unit
  • Sources for buyers / tenants by various means
  • Plans and manages the viewing process with potential buyers
  • Advise and represent the owner / seller in the negotiation and tendering process once there is one or more interested parties
  • Ensures that the appropriate and necessary procedures, including legal and regulatory requirements, are performed and followed throughout the

A real estate agent registered with the Council of Real Estate Agencies representing the owner / tenant is required to have the best interests of their client at heart.

READ: What are Jumbo HDB apartments and where to find them?

BUYER / LESSOR’S AGENT

This is any real estate agent who assists a tenant or potential buyer in the following areas:

  • Search and selection of properties
  • Coordination of visits
  • Negotiation with the seller / owner’s agent in the best interest of the buyer / lessee

The buyer’s / tenant’s agent also provides valuable input in the form of professional advice, e.g. on location, and guides them through the proper process of buying or renting a property, including the necessary documents.

Likewise, a CEA approved real estate agent representing the owner / tenant is required to have the best interests of his client at heart.

Agents are not legally allowed to be both the owner / seller’s agent and the tenant / buyer’s agent at the same time in a transaction, as this would present a conflict of interest.

For rental cases, the landlord’s agent (and sometimes the tenant’s agent) often assists the landlord and tenant throughout the term of the lease with maintenance issues and disputes, although they don’t have to.

Sometimes two agents can agree to negotiate a deal together, one as the landlord’s agent and the other as the tenant’s agent – this is called co-brokerage.

READ: Under-selling: what property sellers and buyers need to know

HIRE: COMMON PRACTICES FOR THE AGENT’S COMMISSION

While no universal and industry standard rental commission rates are imposed here, there are some industry best practices – based on several experienced realtors we’ve spoken to.

However, take note that commission rates may vary depending on situational factors such as urgency and complexity of transactions.

Potential owners / tenants should check with the relevant agents to understand the rationale for their requested commission rates if they differ from those below.

1. Above S $ 3,500 in rent and a two-year lease – Landlord pays one month’s rent, tenant doesn’t pay

If there is only one landlord’s agent (the tenant contacted the landlord’s agent himself), the landlord pays the landlord’s agent a one-month commission. The tenant does not pay a commission.

If the tenant has a tenant’s agent who has assisted the tenant and represents their interest, the landlord pays the landlord’s agent a one-month commission. The landlord’s agent then shares the commission with the tenant’s agent. The tenant does not pay a commission.

2. Above S $ 3,500 rent and a one-year lease – Landlord pays half a month’s rent

If there is only one landlord’s agent (the tenant has contacted the landlord’s agent himself), the landlord pays the landlord’s agent a commission of half a month. The tenant does not pay a commission.

If the tenant has a tenant’s agent who assists the tenant and represents their interests, the tenant pays the agent half a month’s commission, while the landlord pays their agent half a month’s commission.

3. Rent equal to or less than S $ 3,500 and a two-year lease

The owner’s agent receives a one-month commission from the owner.

The tenant’s agent receives a one-month commission from the tenant. If there is no tenant agent, the tenant pays no commission.

4. Rent equal to or less than S $ 3,500 and a one-year lease

The owner’s agent receives half a month’s commission from the owner.

The tenant’s agent receives half a month’s commission from the tenant. If there is no tenant agent, the tenant pays no commission.

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NO FIXED RULES

It is important to remember that these are just standard practices, that there is no hard and fast rule as to whether the landlord or tenant should pay their agents and how much.

It all depends on the situation and how much the tenant / lessor needs the services of the agents. Here are some notable exceptions:

  • Unique or sought after properties such as a well-priced store: The owner’s agent can potentially demand that he not “share the commission” because there is a lot of demand.
  • Low-end rental properties such as room rentals under $ 1000. The owner’s agent may not be able to compel the owner to pay him a commission, even if he is marketing the property on behalf of the owner. owner. In low-end rentals, the tenant may not have as much choice and therefore bargaining power, so the agent has no choice but to collect commissions from the tenants. Technically, they would switch roles to become the tenant’s agent and would have to act in the tenant’s best interest.

READ: HDB Resale Market: 4 Key Forecasts for 2019

SALE / PURCHASE: COMMON PRACTICES FOR THE AGENT’S COMMISSION

1. Private non-land properties such as condos

Sellers pay 2%

Buyers pay nothing whether or not they use a buyers agent. The seller’s agent shares the commission with the buyer’s agent.

2. HDB resale apartments

Sellers pay 2% commission

Buyers pay 1% commission

3. Land properties

Sellers pay 2 percent.

Buyers pay nothing whether or not they use a buyers agent. The seller’s agent shares the commission with the buyer’s agent.

READ: Is Singapore’s Real Estate Market Still a Safe Haven for Investors?

NO FIXED RULES

Similar to the rental commission, again there are no fixed rules about the commission and everything is negotiable depending on the situation. The commission structure on buying properties is usually even more negotiable, as situations tend to be even more unique. Notable exceptions include:

  • Commissions paid by sellers can also be much higher if the seller is in a more urgent situation or the property is more difficult to sell.
  • The commissions charged by the buyer’s agent can sometimes be much higher as well, especially if the buyer’s agent represents a foreign buyer and does a lot more work to help the buyer make a decision. Some agents representing buyers from Hong Kong or China may charge up to 5% commission, from what we’ve heard. In these cases, it would be up to the seller to decide if they are willing to offer this to close the deal.
  • In many cases, and especially in the luxury real estate segment, there may be tiered commission programs that incent the seller’s agent to get a higher price. This could include a 2% commission on properties worth at least S $ 5 million and an additional 5% if the closing price is above S $ 5 million.

READ: Exclusive Rights or Multiple Real Estate Agents: Which is Better?

HOW CAN A SELLER OR BUYER SAVE ON COMMISSION?

If you are thinking of selling or buying a property without an agent, think again. Ownership, being one of the costliest decisions you can make in your lifetime, requires a thorough knowledge of specialized laws and regulations. On top of that, realtors have knowledge and experience in negotiation and can successfully take on an opposing agent.

On the other hand, representing yourself can lead to a complicated and slow transaction at best, and costly legal tangles and monetary loss at worst.

In any case, compare the commissions and services offered by different real estate agents before deciding to name one or more.

A seller’s agent may also seek exclusive rights, a legal agreement to become your sole real estate agent in the marketing and sale of your property.

WHAT IF I AM OWNER OR TENANT? ARE AGENTS A MUST?

A landlord’s agent can save you a lot of headaches as he or she is not only used to finding a property, but also eliminating potential bad tenants. The agent may also be able to help you with tenant issues along the way, depending on the responsibilities agreed to with the agent.

If you are a tenant and can afford the time to research and organize tours of a rental property on your own, you may choose to forgo a tenant’s agent.

In this case our advice is always to find a landlord represented by a landlord’s agent as there have been countless cases of sneaky landlords running away with a tenant’s deposit, or sudden and unfair evictions.

Even if the lease is only for one year, having a real estate agent on both sides means peace of mind.

This article first appeared on 99.co.

Penny D. Jackson