Time for real rules?

April 19, 2008

REAL ESTATE INDUSTRY

Time for real rules?

Shady brokers have given the lucrative property market an image problem, and even agents themselves are calling for tighter regulations

By Tan Hui Yee

'CAN you lend me $30,000?' came the tentative voice in Malay as rookie realtor Sulaiman Ibrahim picked up the phone in February.

The desperate elderly female caller revealed that she had been coaxed by her housing agent to sell her flat. But she found out too late that she could not get a subsidised home loan unless she bought a bigger flat.

Cash-strapped and with a looming deadline for moving out, she started calling randomly realtors like Mr Sulaiman for help.

Recalling the incident, Mr Sulaiman, 36, a former factory manager who joined Roof Real Estate Group this year, says: 'I was shocked. She was asking to borrow money from someone she hadn't met before.'

The brief call gave him a glimpse into the havoc that rogue agents create for clueless home owners.

Going by recent statistics, many such stories abound.

Consumers made 1,113 complaints about the real estate industry last year, a startling jump from 991 in 2006 and 672 the year before. Many said their agents had misled them, misrepresented information and failed to honour promises.

Most complaints involved HDB flat deals, where relatively less-educated buyers and sellers, and more rules to negotiate, mean that many Singaporeans would rather let an agent handle a transaction than do it themselves. More than 90 per cent of the 30,000 resale flats sold each year are handled by agents.

Unfortunately, the estimated 30,000 agents in the market are largely unregulated. The Inland Revenue Authority of Singapore vets only estate agencies, but not individual agents.

Anyone wanting to broker property need only join one of the roughly 1,700 agencies here. No minimum qualifications are needed.

While the larger and more established agencies like PropNex and HSR property group require new sign-ups to go through a two-month in-house course, some rookies broker their first deal even before they 'graduate'. Smaller set-ups do not even offer such courses.

The returns can be sky-high for an industry so easy to enter. Mr Dennis Wong, 53, a former food and beverage marketing manager who joined the Dennis Wee Group barely two years ago, has already made about $1 million brokering deals in high-end homes.

Mr Wong admits: 'The money is very attractive. The amount you earn can be unlimited if you are disciplined.'

According to the agencies, top producers rake in $500,000 to $1 million annually, while average performers earn about $50,000 to $200,000.

A game of cat and mouse

SUCH big money draws fly-by-night brokers who hope to make a quick buck off ignorant home owners. The industry is a regular among the top 10 sectors that the Consumers Association of Singapore receives most complaints about. It shares this ignominy with the timeshare, beauty and motor trades.

Worse, the rate of resolution of realtor-related complaints is startlingly low. Case directly helped to resolve just 43 out of 1,113 such complaints last year, and 27 of 991 in 2006.

It is not clear how many cases go unresolved, as Case's figures do not capture complaints resolved by consumers themselves and those referred to the Small Claims Tribunal. The Housing Board, meanwhile, is engaged in a protracted cat-and-mouse game with wayward agents who abet flat buyers and sellers in conducting illegal transactions.

The most well known is the 'cashback' practice, where the buyers and sellers - with some help from the agent, lawyer and valuer - collude to inflate the price of a flat so that the buyer can get a bigger home loan than is allowed under the law.

Since home loans are typically repaid through Central Provident Fund savings, the scheme allows a flat buyer to prematurely 'withdraw' money from his retirement savings account before reaching age 55. Agents then take a cut of the 'withdrawn' CPF savings.

In April 2005, the authorities clamped down on the practice, but it has not stopped more enterprising cashback schemes from surfacing. From next month, the HDB will impose a checklist of rules which all agents have to go through with their clients before a sale can be inked. This is sorely needed, going by the lengths some agents go to mask the illegality of such deals.

Property agent Serene Chua, 26, once sat through a meeting with a flat seller who was almost convinced by another agent that the cashback scheme was common and hassle-free. Many buyers and sellers of HDB flats, especially those who are less educated, she says, don't know any better. 'It's really how agents present it.'

Academics and industry veterans acknowledge that it is a tough nut to crack. Because individual agents are not licensed, those sacked for unethical conduct can easily move on to another firm. Property agencies, more concerned about bottom lines, have no qualms taking them in if they continue to drive sales.

The result: a very serious image problem.

Road to respectability

THE head of the National University of Singapore's real estate department, Dr Yu Shi Ming, says: 'Every time people think of real estate agents, they think 'unscrupulous', 'untrained', 'unprofessional' and 'unethical'.'

However, Mr Evan Ethan Lim, 39, a unit head at KF Property Network, feels that all real estate agents should not be tarred with the same brush. Many conduct themselves with great professionalism.

'The reality is that a few bad eggs don't represent the whole market,' he says.

Meanwhile, PropNex's chief executive Mohamed Ismail points out that the number of complaints lodged with Case represented less than 4 per cent of the total number of HDB resale deals last year.

'But even though it's a small percentage, you just need 10 agents to mess up 10 transactions which mess up 10 families and it's a big thing,' he says.

Despite calls for tighter controls for more than four years now, the Government has preferred to let the market do the job.

Not that the major players haven't tried.

In 1998, the three real estate bodies in Singapore - the Association of Singapore Realtors, Association of Singapore Real Estate Agents and the Society of Singapore Institute of Surveyors and Valuers Accredited Estate Agents merged to form the Institute of Estate Agents (IEA) to centralise control over agents.

Unfortunately, it was hampered by the lack of teeth from the start. Since membership is not compulsory, it has just 1,500 agents on its roll. And no real power to blacklist or keep errant members out of the industry.

The IEA's president, Mr Jeff Foo, readily concedes: 'We can reprimand, suspend and even expel them, but there is nothing we can do to stop them from practising.'

Current attempts at self-regulation have either met with muted response or been mired in controversy. The IEA runs a two-year-old voluntary registry that displays on its website the names of 21,900 housing agents from about 360 companies so the public can verify if someone is employed by an agency he claims to represent.

It also alerts agencies about brokers with dubious pasts. But one of the biggest players, HSR, has yet to list its 8,000 agents there. When asked why, its chief executive Patrick Liew says he plans to list HSR's agents on its website and is waiting for the 'security of the database' to be 'tried and tested over a period of time'.

Meanwhile, the three-year-old Singapore Accredited Estate Agencies scheme has its own woes. Its board last week introduced a scaled-down test because companies were struggling to get agents to take and pass the original Common Examination for House Agents (Ceha).

The idea was to get agents to use the new test as a stepping stone to Ceha, which is deemed 'too academic' for the average housing agent.

HSR's Mr Liew observes: 'In the last one or two years, because the market was really hot, the agents focused on closing deals rather than studying for the Ceha.'

The real problem? The Ceha is not compulsory.

Adding to the tension is the recent emergence of a new group, the Association of Singapore Estate Agencies (Asea). Formed last month and headed by industry veteran David Ong, a former president of the IEA, it has declared that it wants to raise standards and weed out rogue agents by having industry bosses share information. But the new group, which comprises 15 agencies with 10,000 brokers, has drawn fire from IEA's Mr Foo as being a 'pure waste of resources' and divisive to the already splintered industry.

Entry barriers needed

SINCE housing is probably the single biggest investment for most Singaporeans, industry veterans say the problems are likely to worsen without some form of government intervention to regulate agents.

When contacted, a Ministry of Finance spokesman said: 'The Government's approach has been to encourage and support the industry's efforts to improve the professional standards of individual agents. We are studying various industry proposals for how standards could be further enhanced.'

The head of KF Property Network, Dr Tan Tee Khoon, says: 'Real estate transactions are valued at millions of dollars, and people invest life savings into their purchases. The fact that anybody can be a realtor and the importance of real estate transactions just don't seem to square.'

Dr Tan thinks the industry is too 'fragmented' to regulate itself. For starters, the Government should stipulate minimum entry requirements like two O-level credit passes in English and Maths, as well as proof of registration for trade tests like the preparatory course for the Ceha. Membership of Asea and IEA should also be made compulsory, he says.

The IEA also moots an entry-level training course under the National Skills Recognition System that would orientate all new entrants - regardless of the firm they join - to the basics of the trade. After which, these entrants would have to clock in a certain number of hours each year attending upgrading courses, as well as gun for the Ceha.

In the meantime, Mr Ong thinks the industry has to press on with its own initiatives, while it waits for the magic bullet of legal backing.

'We should go about creating an environment which would be practically self-regulating - through educating the agents, informing consumers of their rights and their responsibilities and where they can take issue with agents if they do not deliver,' he says.

For now, all eyes are on the authorities and when - or if - they will finally rein in the industry which some now call a 'cowboy town'.

For agents like Mr Sulaiman, the answer is obvious. 'Even taxi drivers have licences, so why not agents?'

tanhy@sph.com.sg


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Association of Singapore Estate Agencies

Year formed: 2008

Base: Club Street

Membership: 15 agencies (with a total of 10,000 agents)

Leaders: President David Ong from Benchmark Real Estate, first vice-president Francis Ong Chin Hwee from Glo Property Consultants, and second vice-president Peter Koh from Gateway Property Consultants.

History: Set up last month to represent property agencies rather than individual agents. The idea was to create a platform for industry bosses to share best practices and information about rogue agents.

However, the group has been mired in controversy from the beginning. Its formation has been slammed by the Institute of Estate Agents (IEA) as a wasteful and divisive exercise.

To which, president David Ong would only say: 'It's not divided, just categorised and classified.'

Among its members are companies such as KF Property Network, HSR property group and DTZ Debenham Tie Leung - which protested against the IEA's move to issue 'practising certificates' to its members last year. They had argued that this 'practising certificate' would be confused with the accreditation provided by the Singapore Accredited Estate Agencies (SAEA) scheme.

Initiatives: It has thrown its weight behind the SAEA scheme as well as the recent move to introduce a scaled-down test for agents seeking accreditation as the current Common Examination for House Agents is deemed too difficult and academic.

Future plans: To hold talks to raise awareness about consumers' rights and responsibilities in property deals. Also wants to introduce a checklist of services that consumers should expect from an agent when they hire one.


EastLiving.com.sg

Contact Stuart Chng: (65) 9691 9907
Email: stuart.chng@eastliving.com.sg

EastLiving - Singapore Property and Real Estate DB