Information is a Negotiator's Greatest Weapon
- Victor Kiam
You may have been told by someone that by going to the seller’s agent directly, you will get a better deal being a direct buyer as compared to going in with a buyer’s agent.
I could totally understand why most buyers would think this way but allow me to share why it is not as straightforward as it seems.
How Cobroking Works?
First, let us look at how cobroking works in Singapore’s private residential resale market.
Seller has a property to sell and he/she appoints an agent (seller’s agent) to market the property for a fee e.g. 2% of the property price at an expected closing price.
Buyer wants to buy property and appoints an agent (buyer’s agent) to search for one.
Though there are buyers who will gladly pay a search fee e.g. 1% of the property price to their own agent for the effort and to negotiate on their behalf, most buyer’s agent collect the fee from the seller’s agent and this is the act of cobroking.
By agreeing to cobroke, the seller’s agent will share a portion of their commission with the buyer’s agent. The amount is to be negotiated and mutually agreed between the two agents but in most cases, it would be split equally i.e. both seller’s and buyer’s agent to get 1% each.
Good for Seller's Agent = Good for Buyer?
Now it’s super clear why seller’s agent would prefer to deal direct with the buyer because they get to keep the full commission to themselves.
The question here is, does it mean when they are paid more, you will get to buy the property at a lower price as compared going through your buyer’s agent?
Who Decides on the Final Price?
Seller’s agent or seller?
Answer is obvious – of course the seller!
When an offer is presented to the seller, it doesn’t matter if it’s from a direct buyer or via a cobroke agent. The seller will always expect the seller’s agent to secure the highest possible price before agreeing to grant the OTP.
If the offer is below seller’s expectation, the seller’s agent has to inform all interested parties of the counter offer and not just to the direct buyers.
Eventually, the property will be sold to the highest offer and NOT the highest direct buyer.
What if the Seller's Agent Play Cheat?
This is a valid concern and it has happened before.
However, by not cobroking or communicating an offer to the seller for selfish reasons, the seller’s agent must be prepared to be severely dealt with by our licensing authority, CEA.
The disciplinary outcome is often a 5-figure sum and suspension period longer than circuit-breaker.
No doubt there will always be daredevil but as law-abiding as most of us are, the chances of your offer not being presented to the seller just because it is made through a buyer’s agent has decreased dramatically since CEA was formed in 2010.
You could refer to one of the highest fine and longest suspension meted out to a property agent here – Property agent fined S$30,000, suspended for ‘unprofessional, unethical conduct’.
Below are 2 recent suspension records taken from CEA’s website when seller’s agent fail/refuse to cobroke and failing to submit an offer.
I hope the above will dispel the misconception that a buyer will get a better deal by going direct to the seller’s agent.
If you wish to learn more about the advantages of having a buyer’s agent on your side, we have more information over here.