Tuesday, 11 September 2012

Real estate: A flawed industry?

The real estate industry is being manipulated by its agents such that it is impossible to deal independently of their agencies, and access to information about housing availability has been restricted so as to channel enquiries to themselves.

In countries where I have lived, commissions are earned only from owners. In Singapore, the ability to charge owners and buyers/renters helps create a market that allows agents to collude and ensure they keep prospective buyers/renters within their control.

Most properties listed online are on estate agents' websites or advertised by agents on independent websites. It is thus common for agents, when called regarding a property, to say that "it has already been taken, but I can help you find another".

Agents acting for owners do not have to market directly to buyers/lessees but only have to deal with other agents, a sign of something wrong in the industry. Likewise, agents acting for buyers/lessees do not have to go to owners; they tap on their industry buddies.

The best course of action for agents is obviously to agree to owners' demands to ensure relationships and revenues. So how can they negotiate in good faith for buyers/lessees?

There are too many agents feeding off the industry. But estate agents are not the real estate industry, which is made up of all the individuals wanting to sell, lease, buy or rent. Agents are only a vehicle to bring these together.

They should not be the only vehicle, allowed to manipulate the market in order to control how individuals access the market.

The Competition Commission of Singapore's ruling in 2008 to stop the Institute of Estate Agents from distributing "guidelines" for commissions was a first step to force agencies to act in a more competitive manner.

It was good that the Council for Estate Agencies (CEA) was formed in 2010 to regulate the conduct and licencing of agents. At this stage, the industry structure has not changed, but the CEA can issue codes of practice for estate agents.

It would be interesting to see what practices the CEA will legislate against over time. The CEA can also take complaints and issue penalties.

It is up to the public to make such complaints, to make desired changes to the structure of the real estate industry.

Source: http://www.todayonline.com/Voices/EDC120912-0000062/Real-estate--A-flawed-industry

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