Property Jargon of the Day: Agent Commissions

Once in a while, 99.co takes a piece of property jargon and breaks it down in plain English. Today, we’re looking at agent commissions.

The agent commission is always negotiable

No law in Singapore fixes a property agent’s commission. It is always a negotiable amount. It’s not unheard of for some buyers to pay agents more during urgent situations.

For example, say you are upgrading to a bigger condo and purchasing your new home before selling your old one. This would subject you to an Additional Buyer’s Stamp Duty (ABSD) of 17% if you’re a Singapore citizen. However, you can apply for ABSD remission if you sell your old home within the next six months.

You finally locate a buyer with the highest price about two months before the deadline. But two weeks later, the buyer forfeits the deposit and backs out. This leaves you in a crisis: you risk losing your 17% ABSD if the house doesn’t sell. In such an instance, you may be inclined to offer a higher commission to any agent who can sell your house quickly.

It’s also possible that agents will ask for a higher commission if the property you want them to sell is especially challenging. For example, if the property has a very short lease remaining or the unit has defects that can’t be rectified (e.g. water seepage from the exterior, which the management will not resolve).

Likewise, some property agents may not be willing to co-broke (share their commission with another agent).

And in a hot rental market (like what’s happening now), we’ve heard of tenants paying commissions to their agents as well.

How agent commissions work

Sale of properties

As mentioned earlier, there’s no hard and fast rule on the commission rates. But by convention, for the sale of properties, agent commissions are a percentage of the deal they close. This is as follows.

Condos

The seller usually pays 2% (sometimes up to 4%) of the final sale price. If the buyer has an agent, the commission is split between the two.

HDB resale flats

The seller usually pays 2% to their agent, while the buyer pays 1%.

Landed properties

Depending on the arrangement, the seller pays 2% (or maybe more), while the buyer pays nothing (same with condos).

Rental of properties

Likewise, there’s no hard and fast rule on the commission rates for rentals. By convention, here are the common practices.

Two-year lease, with rental above S$3,500 per month

The landlord pays their agent one month’s rent as a commission. If the tenant has an agent, as of 2023, we understand that the tenant will have to pay the commission to their agent.

One-year lease, with rental above S$3,500 per month

The landlord pays the agent half a month’s rent. If the tenant has an agent, the tenant pays the tenant’s agent half a month of rent.

Two-year lease, with rental at S$3,500 per month or below

Both tenant and landlord pay one month of rent to their respective agents (if any).

One-year lease, with rental at S$3,500 per month or below

Both tenant and landlord pay half a month of rent to their respective agents (if any).

How should you approach a property agent about negotiating their commission?

Some property agents ask outright if you will pay the full “comm” (commission). Otherwise, you should take the following steps.

1. Upon meeting the property agent for the first time, communicate your intent right away. Be fair and waste neither their time nor yours: state if you will not pay the full commission, for example.

2. Explain the situation to the property agent. For example, if you offer a higher commission because you need to sell fast, ensure the agent understands what you’re facing. You should set clear conditions, like a fixed deadline, for the agent to meet.

If the property agent is uncomfortable with your situation (e.g. they don’t believe your house can be sold in two months despite their best efforts), they should back out at this point.

3. Cement the negotiations in writing. Never rely purely on a verbal contract; if your property agent says they will take a lower commission, this must be reflected in at least a text or a WhatsApp message. Preferably, however, get them to write it in an email.

4. Evaluate the agent and get them to give updates in writing. For example, you should receive simple updates like “two more viewers this week, so far, the highest offer is S$X”.

If you have an exclusive agreement with the agent, you may also request your agent to add a “Commitment to Service” document to the estate agency agreement. This document lists the agreed services offered, such as the frequency of ads and viewing sessions. You can terminate the agreement if the agent does not meet this.

Do remember to give your agent feedback along the way. Let them know if you feel the number of prospective viewers seems low or if the offers received aren’t ideal.

Recent news on agent commissions

In July 2024, the Singapore Estate Agents Association (SEAA) introduced new industry guidelines. The guidelines aimed to change how property agents earn their commissions. Specifically, the guidelines urged buyer agents to collect fees directly from buyers rather than relying on a share of the seller’s commission.

However, this shift has received a tepid response, with many private property buyers still unwilling to pay for historically free services. Property agents face challenges, negotiating their commission with seller agents as buyers resist the changes. Some agents worry that discussing commissions with clients might harm long-standing relationships.

Despite the SEAA’s efforts, which included signing agreements with over 66 property agencies covering more than 34,000 agents, the impact on the market has been minimal. While promoting transparency, the guidelines are not legally enforceable, leading to a slow adoption rate.

On the other hand, the rental market has shown more activity, with a significant uptick in tenants paying commissions to their agents. The SEAA is optimistic that continued education and advocacy will slowly shift perceptions and bring commission practices in line with the new guidelines.

What part of a bit of property jargon confuses you? Voice your thoughts in our comments section.

If you found this article helpful, 99.co recommends Letter of Intent (LOI) : LOI for Tenants in Singapore and What is the Annual Value of a property and how do I check mine?