Recently, we had a conversation with a digital marketing expert on how we can connect with more qualified home sellers and buyers in Singapore. Somewhere within our chat, we landed on the topic of commissions of real estate agents in Singapore.
2% Commission in Singapore
The general rule of thumb is that property agents will charge 2% for sellers and 1% for buyers. But this got us thinking, where did this number come from and who was dictating it?
Curious to find out this mystery, we embarked on our journey exploring our resources and contacts within the industry.
“It’s a very long practice that we charge 2%."
"My group leader recommends me to charge 2%"
"2% is the market rate."
To our surprise, it seemed that even the most veteran agents in the market do not know the origin of this figure.
Not satisfied with what we've gathered so far, we started looking into what our other counterparts were charging around the world.
7.5% Commission in Mexico
Source: The Wall Street Journal
We found out that the average highest commission payable around the world was 7.5% in Mexico, followed by 5.5% in the United States in 2015.
With this number in mind, searched for Singapore which was at 1.5% (averaging the 1% from buyers and 2 % from sellers). We then found a few other countries in the same ballpark as us: Sweden, Ireland, Netherlands, and the United Kingdom.
So why is it that the agents in these countries have the lowest amount of commissions? Were the markets fundamentally different? Were we doing things differently? Is it a governmental initiative to attract foreign investors? And in Singapore's case, does CEA dictate what a reasonable amount is?
CEA's Guidelines for Singapore - Free Market
We dug further and found out that consumers would often ask CEA if commission rates were fixed by them? The short answer is “No”.
It turns out that commission rates are in fact negotiable.
In a public perception survey commissioned by the Council for Estate Agencies (CEA) last year, consumers showed low awareness that the commission payable to an estate agent/salesperson is negotiable. To reiterate, CEA does not fix commission rates or provide commission guidelines so as to allow market forces to drive competitive pricing in the industry. (Source: CEA)
Salespersons (or real estate agents) will then have the incentive to price their services competitively, and you, as a consumer, can negotiate the best rates for the services you require.
CEA had also released a series of questions to help consumers better understand the topic around commission payable. If you're interested, you can read more about agents' commissions here.
What this means is that agents and yourself can fundamentally enter into a mutually agreed commission payable percentage with a promise of a range of services that you require.
3% vs. 1%
We know of agents who charge 3% commission for the sale of a unit. With 3%, you would expect the royal treatment in Singapore correct?
And yes, you would. These agents provide storage, home staging, multi-media outreach among others to beautify the listing for sale before marketing homes. And in turn, driving the value of the home up beyond what you would've secured without the services. On average, a well-staged home fetches a higher price.
Aside from attracting buyers, staged homes also increase the amount of profit. According to the 2019 National Association of Realtors report, 25% of property agents who represent buyers say home staging increased offers up to 5% while agents representing sellers put a higher dollar value on home staging. (Source: SFR)
At Keystone, we like to think outside the box and do things a little differently.
As a sneak peek, we have an internal system 1-to-11 — With a strong group of more than 200 agents in Altitude Group, ERA. We are able to represent sellers in marketing their properties with the support of our internal team collaboration. With the seller’s consent, our team will be able to assign 10 other agents to help market the seller's one single listing in all the popular marketing outlets like PropertyGuru, 99.co, flyer distribution, and most importantly, our network of ready buyers.
As such, the commission percentage at Keystone will vary dependent on what our client's needs are. In the example above, for clients needing a very rapid result where we would activate our 1-to-11 system, we would charge our client up to 3%.
At Keystone, we take pride in our work and our commitment to bring you the best-fitted buyer for your property by leveraging our technology, and our extensive network.
Having said that, while the market rate is 2%, our commission percentage ranges dependent on the needs of the client and we are always open to having a discussion around that.
Disclaimer: While clients choose us, we too choose our clients. We believe that the marketing of property has to be a partnership and so if we do not feel it's a good fit, we would not be the correct team to represent the potential client.