5 things to know before paying a property agent’s commission

This article talks about paying a property agent’s commission.

Buying, selling or renting a property is an important milestone in your life.

Yet, it can also be challenging and complicated for some. You can engage a property agent to facilitate the transaction and smoothen the process.

Before you engage a property agent, here are five things you should know about their commission.

#1: The rate is negotiable.

Yes, you read it right.

The commission rate is not fixed by the Council for Estate Agencies (CEA) or any other government agency. It is determined by market forces to encourage competitive pricing.

Your property agent may propose a market rate (that ranges depending on the type of transaction), but negotiate it with your agent to ensure it suits your budget.

#2: Several factors might affect the commission.

The most basic factor is the scope of work.

If, for example, you only require your property agent to do paperwork, you can negotiate for a lower commission. If you expect your agent to provide the full suite of services, you can expect to pay a higher rate.

For the latter, there are other factors to consider, such as the type of experience the property agent has and the size of his/her database of leads. Some agents focus on certain types of transactions, like HDB resale or private rental transactions, and in certain locations.

All agents’ completed residential property transactions for the past 24 months are available on the respective agent’s profile page in the CEA Public Register. There, you can view the party they represented, the type of transaction, and the town or general location of the property.

#3: Fix the rate before your property agent starts work.

This is an important step that should not be missed to minimise misunderstanding after the transaction has been completed.

State the commission rate clearly in the CEA Prescribed Estate Agency Agreement that should be signed between your property agency and you to formalise the relationship before your agent works on the transaction.

#4: Mind the GST.

There is no avoiding this, unfortunately.

If the property agency that your agent works for is GST-registered, you must pay the prevailing GST rate. Check this with your agent upfront.

Some agencies might absorb the GST, and this is something you should clarify with your property agent. Regardless of the outcome, be sure to document the GST payment arrangement in the CEA Prescribed Estate Agency Agreement signed with the property agency.

#5: The commission is only payable to the agency your property agent works for.

No costs related to the transaction should be paid to your property agent. If they tell you otherwise, you are not being properly advised.

The commission is to be paid only after your property agent has fulfilled all the duties listed in the CEA Prescribed Estate Agency Agreement and the transaction has been completed. Payment modes should be verifiable, including crossed cheques and bank transfers.

Of course, you can also choose not to engage an agent and handle the property transaction yourself. This is provided you are familiar with and confident in navigating the rules, regulations, and processes in a property transaction.

Otherwise, engage a property agent to do that for you.

What you may have missed recently about agent commissions

The SEAA introduced new guidelines in July 2024 to address commission practices in the property market, advocating for agents representing buyers to collect their fees directly from the buyers rather than sharing commissions with seller agents.

Two months later, private property buyers have not responded as expected. Property agents have reported that buyers are hesitant to pay extra fees and prefer the previous setup, where services were mostly free. The guidelines, intended to reduce conflicts of interest and enhance transparency, have not had a significant impact on the commission system yet.

Most property agencies have agreed to follow the guidelines, but most private property transactions are still being conducted as they were before. Agents are still using old co-broking arrangements. There is a small change happening in the rental market, where more tenants are paying their agents directly. This shows that there is more acceptance of this practice than in the private sale market.

Industry leaders highlight the need for better public education and clearer communication to bridge the gap between guidelines and practice. They emphasise the challenges agents face in convincing buyers to adapt to these new standards.

Additional reading: Property agent commission in Singapore, How much should I pay?