Property agent commission in Singapore: How much should you pay?

A good property agent more than deserves his or her commission, but many buyers and sellers are often unsure about how much to pay. So are landlords and tenants.

Truth is, there are many factors that determine property agent commissions in Singapore; even seasoned sellers, buyers and renters can become confused about industry standards.

Here's a guide to help you be absolutely sure about the commission you should pay for any type of property transaction, be it selling, buying or renting.

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

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LANDLORD'S/SELLER'S AGENT

This is any property agent appointed by the landlord or seller to market a unit. This agent:

• Strategises the promotion and presentation of the unit
• Sources for buyers/tenants through various means
• Schedules and manages the viewing process with prospective buyers
• Advises and represents the landlord/seller in the negotiation and bidding process once there are one or more interested parties
• Ensures that the proper and necessary procedures including legal and regulatory requirements are executed and adhered to throughout

A Council for Estate Agencies-registered property agent representing the landlord/tenant is obliged to have his/her client’s best interests at heart.

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BUYER/TENANT'S AGENT

This is any property agent who assists a potential tenant or buyer in the following:

• Search and selection of properties
• Coordination of viewings
• Negotiation with seller/landlord’s agent in the buyer/tenant’s best interests

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

Similarly, a CEA-registered property agent representing the landlord/tenant is obliged to have his/her client’s best interests at heart.

Agents are not legally allowed to be both the landlord’s/seller’s agent and the tenant’s/buyer’s agent at the same time in any deal, as this will 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 period of the lease with regard to any maintenance issues and disputes, although he/she is not obliged to do so.

At times, two agents may agree to broker a deal together, one as a landlord’s agent and the other as the tenant’s agent - this is called co-broking.

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RENTING: COMMON PRACTICES FOR AGENT COMMISSION

Although there are no universal, industry-standard rental commission rates imposed here, there are industry best practices - based on several experienced property agents that we spoke to.

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

Prospective landlords/tenants should inquire with the relevant agents to understand the rationale behind their requested commission rates if they differ from the below.

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

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

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

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

If there is only a landlord’s agent (the tenant contacted the landlord’s agent on his/her own), the landlord pays the landlord’s agent half a month’s commission. The tenant does not pay a commission.

If the renter has a tenant’s agent who assisted the tenant and represents his interest, the tenant pays the tenant’s agent half a month’s commission, while the landlord pays the landlord’s agent half a month’s commission.

3. At or below S$3,500 in rent and a two-year lease

Landlord’s agent collects a one-month commission from the landlord.

Tenant’s agent collects a one-month commission from tenant. If there’s no tenant’s agent, the tenant does not pay any commission.

4. At or below S$3,500 in rent and a one-year lease

Landlord’s agent collects half a month’s commission from the landlord.

Tenant’s agent collects a half a month’s commission from the tenant. If there’s no tenant’s agent, the tenant does not pay any commission.

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NO FIXED RULES

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

It all depends on the situation and how much the tenant/landlord needs the services of the agents. Some notable exception cases include:

• Unique or in-demand properties such as a well-priced shophouse: The landlord’s agent can potentially demand that he does not “share commission” because there is plenty of demand.
• Lower-end rental properties such as room rentals below S$1,000. The landlord’s agent may not be able to get the landlord to pay him commission even though he may be marketing the property on the landlord’s behalf. In lower-end rentals, the tenant may not have as much of a choice and thus negotiation power, so the agent has no choice but to collect commissions from tenants. Technically, they would be switching roles to become the tenant’s agent and should be acting in the tenant’s best interest.

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SELLING/BUYING: COMMON PRACTICES FOR AGENT'S COMMISSION

 1. Non-landed private properties such as condos

Sellers pay 2 per cent

Buyers pays nothing regardless of whether they are using a buyers’ agent or not. Seller’s agent splits commission with buyer’s agent.

2. HDB resale flats

Sellers pay 2 per cent commission

Buyers pay 1 per cent commission

3. Landed properties

Sellers pay 2 per cent.

Buyers pay nothing regardless of whether they are using a buyers’ agent or not. Seller’s agent splits commission with buyer’s agent.

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NO FIXED RULES

Similar to rental commission, again there are no fixed rules on commission and everything is negotiable depending on the situation. The commissions 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 go a lot higher as well if the seller is in a more urgent state of affairs, or if the property is harder to sell.
• Commissions demanded by the buyer’s agent may sometimes be much higher as well, especially if the buyer’s agent is representing an overseas buyer and doing a lot more work to help the buyer make a decision. Some agents representing buyers from Hong Kong or China may demand up to 5 per cent commission, from what we have heard. In these instances, it would be up to the seller to decide if he is willing to offer that to close the deal.
• In many cases, and especially in the luxury property segment, there can be tiered commission schemes that incentivises the seller’s agent to get a higher price. This could include a 2 per cent commission on properties worth at least S$5 million and an additional 5 per cent if the closing price is above S$5 million.

READ: Exclusive rights or multiple property 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. Property, being one of the most expensive decisions you make in your lifetime, demands a thorough knowledge of specialised law and regulations. On top of that, property agents have knowledge and experience in negotiation, and can successfully go toe to toe with an opposing agent.

On the other hand, representing yourself can result in a messy and slow transaction at best, and costly legal entanglements and monetary loss at worst.

In any case, do compare commission fees and services offered by different property agents before deciding to appoint one or more.

A seller’s agent may also seek exclusive rights, a legal agreement to become your sole property agent in marketing and selling your property.

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

A landlord’s agent can save one from a whole lot of headaches, as he or she is experienced in not just finding a property, but also screening out potentially bad tenants. The agent may also be able to help you deal with tenant issues along the way, depending on agreed upon responsibilities with the agent.

If you are a tenant and can afford the time to search and arrange viewings for a rental property yourself, you could choose to forgo a tenant’s agent.

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

Even if the lease is only for a year, having a property agent on either or both sides means peace of mind.

This article first appeared on 99.co.