If you are one of the many who applied for an HDB Build-to-Order (BTO) flat and are still waiting because of delays due to the ongoing COVID-19 pandemic and might be thinking of buying a resale flat instead, there is one important thing you have to take note of – you need to pay commission to the property agent if you choose to transact using one.
Know about Council for Estate Agencies
So how much commission must you pay? According to the Council for Estate Agencies (CEA), there is no fixed commission rate.
In case you are wondering who the CEA is or their role, the CEA is the government agency that regulates the Singapore real estate agency industry.
The CEA does not fix commission rate nor do they provide guidelines on commission amounts.
This is to allow market forces to drive competitive pricing in the industry. What this means is that it will incentivise property agents to price their services competitively.
You are allowed to negotiate the amount or percentage, components of fees and expenses, and terms with your appointed agent/agents.
As property agents only earn the commission when there is a successful transaction, you should only pay the commission after the transaction is completed.
The CEA also advise that you should always pay the commission to the property agency that your agent belongs to, and not directly to the agent.
Before appointing a property agent/agents, you should compare and negotiate the best rates for the services you require. You should ask the agent/agents to provide a breakdown of the fees, as well as the services and options to be offered.
Both you and the agent should agree on the commission rate before you sign the estate agency agreement to appoint the agent.
Next, how much to pay?
For buying and selling, even though there is no fixed commission rate, the market rate is about 1% to 3% depending on the amount of work you require the agent to handle.
If you want an exclusive* agent and you want him/her to handle everything, you should offer a higher commission rate.
One important point to note is that property agents are not allowed to collect commission or fees from more than one party in a single transaction.
If the agent collects commission from you, he is not allowed to collect a commission/fee from the other party or a co-broke agent.
For example, if you sold your property through your agent and pays him a commission, the agent is not allowed to collect another commission from the buyer of your property.
Once the commission amount or rate is agreed between both parties, it should be recorded in the estate agency agreement signed by both you and the agent, and you should have a copy of the agreement.
For rentals, if the lease period is 12 months or less, the minimum commission you should pay the agent is half a month’s rental. For rentals with a lease period of 24 months or less, the commission should be equivalent to a month’s rental.
For appointing an exclusive agent*
If you are appointing an exclusive agent, the agreement is for a period of up to three months.
During the validity period, even though you managed to transact (buy, sell or rent) yourself, i.e. you transact with a family member or friend, you are required to pay commission to the exclusive agent.
And if your property is transacted with a party introduced by the exclusive agent’s agency within three months after the validity period, you are still required to pay commission to the appointed agency.
For non-exclusive agreements, you can use as many agents as you like and you only pay commission to the agent who successfully helps you to complete the transaction.
Any GST incurred?
If your appointed agent’s agency is a GST-registered company, the agent must collect GST on commissions.
The GST amount is payable to the Inland Revenue Authority of Singapore (IRAS).
However, it is up to you to negotiate with the agent to see if he/she is able to absorb the GST.
It is also important to check to ensure that the agent’s agency is GST-registered.
To summarize, there is no fixed commission rate and you are free to negotiate the rate/amount. You only pay a commission after the property is transacted and you should make payment to the agent’s agency and not directly to the agent. GST is payable if the agency is GST-registered.
Have A Question? Feel Free To Comment Below.
Are you looking for a new home? Head to Mogul.sg to browse your preference of properties for sale or rent in Singapore.
Comments