NATIONAL UNIVERSITY OF SINGAPORE

DEPARTMENT OF REAL ESTATE

RE4180 REAL ESTATE PRACTICE AND RESEARCH

Group Project 1 – First Semester 2008/2009

Question:

As a consequence of the growing competition within the real estate market, the real estate
industry is constantly exploring ways on how to expand and develop its business
opportunities. The product/market expansion grid provides four different strategies for
business development emphasizing on either products or markets. In view of the unique
nature of real estate products and services, examine whether it is better to focus on product
development or market development in relation to one of the real estate professions below.

“Marketing Agents”

Group Members:

Chua Hiong Hui (U054797Y)

Chua Hwee Ching, Callie (U054794N)
Chua Kang Hian, Desmond (U054795B)
Tung Puay Ping (U054793A)

Lecturer: Dr Grace Wong

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Contents

Executive Summary.............................................................................................................3
1. Introduction ......................................................................................................................4
2. Background ......................................................................................................................4
3. Products and Services of Marketing Agents................................................................4
a) Sales and Rental of Properties .....................................................................................4
b) Marketing of Local and Overseas Properties................................................................4
c) Property Management Services ....................................................................................4
d) Consultancy and Research Services ............................................................................4
e) Asset Management & Property Investment Services ...................................................5
f) Property Development Advisory Services......................................................................5
g) Super high-end Luxury Homes .....................................................................................5
h) En-bloc Sales.................................................................................................................5
i) Design and Build Services..............................................................................................5
j) Real Estate Project Management...................................................................................5
4. SWOT Analysis ................................................................................................................6
Strengths and Opportunities ..............................................................................................6
a) Lucrative Jobs................................................................................................................6
b) Low barriers of entry......................................................................................................6
c) High Demand for Marketing Agents ..............................................................................6
d) “Be your own Boss” in time management and entrepreneurship .................................7
Weaknesses and Threats ..................................................................................................7
a) Sales/income easily affected by gloomy property market ............................................7
b) Low barriers of entry......................................................................................................7
c) Unglamorous Job...........................................................................................................8
d) High turn-over rate of agents.........................................................................................8
5. Product Development......................................................................................................9
The Strategic Planning ......................................................................................................9
a) Comprehensive and intensive in-house courses ..........................................................9
b) Build up a strong clientele network ...............................................................................9
c) Create a useful net portal ..............................................................................................9
d) Value-added services ..................................................................................................10
e) Franchising own set of Sale/Lease agreements, training modules and services ......10
6. Potential Ethical Issues and Problems .......................................................................11
a) Misrepresentation ........................................................................................................11
b) Unethical agents working for their self-interests instead of the client’s’ .....................11
c)“Free-riders” problem....................................................................................................11
d) High costs incurred for conducting courses for agents...............................................11
7. Recommendations.........................................................................................................12
8. References......................................................................................................................13

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Executive Summary

Marketing agents are seemed to be professionals to help connect the buyer to the seller. A
lot of home seekers and investors use the services of marketing agents not just for getting
good deals but also to dispose off their property faster.

Current services of marketing agents include managing sales and rental of properties,
marketing of local and overseas properties, involving in property management services.
Other value-added services include consultancy and research services, providing asset
management & property investment services, property development advisory services,
dealing with niche-market clients such as super high-end luxury homes, handle en-bloc
sales, providing design and build services and last but not least, real estate project
management.

The strengths and opportunities are: - marketing agents are quite lucrative jobs as it is based
on commissions, the more foreclosures made, the more earnings the agent will get. Due to
low barriers of entry, employees could easily enter into the marketing agent line for a change
of career even he/she is inexperienced. With its lucrative commissions and increasing labour
demand every year, licensed agencies will be looking forward to employ enthusiastic
recruits. Employees are not tight down by its rigid working hours, rather he/she can arrange
time with his clients. As the agent meets people from all walks of life, he/she is able to
assess into greater business network and to extensive resources.

The weaknesses and threats are: - sales/income is easily affected by gloomy property
market. Low barriers of entry into the industry have further incurred problems to the image of
the occupation. With employees from all walks of life, education levels and different
backgrounds, sometimes there could be some black sheep among the agents offering poor
services or misrepresenting facts. Due to the above circumstances, they result a high turn-
over rate of agents.

The optimal strategy will be product development where products/services could be further
developed in the existing market. Other than improving and enhancing the existing services,
the approach is also to bring in new services/ideas into the market, consisting of highly
innovative marketing ideas, effective marketing tools, wide networking and creative &
systematic training. Strategies include: - having a comprehensive and intensive in-house
courses, building up a strong clientele network, creating a useful net portal, value-added
services and franchising own set of sale/leasing agreements and training modules and
services.

The product development strategies would be likely meet up with some hiccups in the
process due to its fragmented structure and existing and potential ethical issues and
problems. But with recommendations of pushing for second-tier licensing, introducing new
barriers of entry through Government intervention and subsidies for training and self-
regulation from the big players, the image of a marketing agent will slowly change from
unethical, unscrupulous to a professional, customer focused and knowledgeable occupation.

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1. Introduction

Marketing agents are seemed to be professionals to help connect the buyer to the seller.
They also handle the rental market wherein they connect tenants to landlords and even
maintain the property on the behalf of the landlords. In Singapore, the marketing agents
work by linking together the two interested parties and charging a commission for their
services. Some co-broke, where the agent engages with another agent’s buyers and sellers.
For sales, they charge commission only to the seller but for rentals (i.e. agent managed
rentals) the commission is charged to both parties involved in the transaction. Agents
generally calculate their fee as a percentage of the selling price (in case of sales) and as
part of the rent (for rentals).

2. Background

A lot of home seekers (including real estate investors) use the services of marketing agents
not just for getting good deals but also to dispose off their property faster especially when
they need to travel or in need of liquidity. Since marketing agents are probably most familiar
with the market situation in their region of operation due to networking, it makes sense to
approach them to get an idea of the going rate for properties in that region.

3. Products and Services of Marketing Agents

a) Sales and Rental of Properties

The most common services that marketing agents provide are connecting a buyer to a seller
to form a property transaction. By closing this transaction, they earn a commission. Agents
are also heavily involved in the property rental market earning commissions. Moving forward,
IEA1 has removed IEA’s guidelines in September 2008 and paving the way for industry
players and real estate agencies to set their own commission guidelines.

b) Marketing of Local and Overseas Properties

Some marketing agents (ERA, CBRE) in Singapore will work together with Real Estate
Developers such as Capitaland, CDL. The developer usually signs an exclusive agreement
with the marketing agency, allowing its pool of marketing agents with exclusive-rights to
market their properties. This tends to encourage the agents to commit themselves fully and
perform well during the marketing process. This is also a common practice in overseas,
especially in regional areas where the developers engaged the local agents to do marketing,
advertising for their new property launches.

c) Property Management Services

Quite a few agents provide such services in Singapore. Agents provide sales, rental and
management services to client’s property.

d) Consultancy and Research Services

Apart from earning commissions from property transactions, some agents provide
consultancy and research services to small and even big developers. This is because agents

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Institute of Agents is a local body formed by the merger of 3 real estate bodies in Singapore, namely the Association of
Singapore Realtors (ASR), Association of Singapore Real Estate Agents (ASREA) and the Society of Singapore Institute of
Surveyors and Valuers Accredited Estate Agents (SOCREA), to promote and protect the interests of estate agents as well as to
protect the interests of Members of the public who engage the services of estate agents.

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are more aware of the market conditions and they can provide one-stop services for
developers.

e) Asset Management & Property Investment Services

As some owners are always on the move, they do not have the time to stay in their countries
looking after their assets. They tend to engage marketing agents to manage their assets and
investments.

f) Property Development Advisory Services

Small developers or developers from overseas might not be familiar with local real estate
market. Agents provide such services by advising them the kind of properties that best suit
them.

g) Super high-end Luxury Homes

Super high-end luxury home seekers are usually super-rich clients whom required special
attention and needs by professional marketing agents. Agents will provide very personal
service for these super rich buyers, for example, helping them to find suitable interior design,
furniture, lightings and even cleaners for the house.

h) En-bloc Sales

When an old development wants to go for a collective sale, they usually form a committee
and engage lawyers and marketing agents to prepare the paperwork for the en-bloc process.
Marketing agents provide such services by pulling all interested parties together, put up
advertisements of the sale, gather enough votes from the majority and submit the necessary
documents to Strata-Title Board (STB) for approvals.

i) Design and Build Services

After buying a piece of land, owner may not know how to build or renovate it. Thus, agents
can assist owners by finding suitable contractors and architects to design and build for that
particular piece of land with some networking.

j) Real Estate Project Management

Developers sometimes may need such services from agents to manage their real estate
project. By engaging suitable architects, consultants and contractors, agents provide value-
added services for their clients.

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4. SWOT Analysis
Strengths and Opportunities

a) Lucrative Jobs

Although IEA has removed the commission guidelines, marketing agents get to share as
much as 30% of their commission income with the company by joining it. In return, they get
to leverage on the company’s resources to source for property sellers and buyers.

Take for example the sale of a five-room HDB flat in Bishan, which can fetch around
$400,000 in today’s market. The agent who helps the property owner closes the sale can
charge the owner a fee of 2% (through negotiation) of $400,000, or $8,000. An agent who
helps a property buyer buy that HDB apartment can charge 1% of $400,000, or $4,000. A
high-end condominium apartment in a prime location like District 10 can easily sell for a
million dollars, if not a lot more. Bagging just one such sale could potentially make the agent
2% x $1,000,000, or $20,000.

Of course, the lucrative income depends very much sometimes on the real estate market
and the hard work the agent puts in. The more foreclosures made, the more earnings the
agent will get.

b) Low barriers of entry

New real estate agents join a crowded field with many different people basically peddling the
same service. One of the reasons is that the barriers to entry in the real estate field are
relatively low.

With the high turn-over of jobs in other industries, employees could easily enter the
marketing agent line for a change of career even he/she is inexperienced. There have been
successful stories of retrenched employees from other sectors working in real estate agent
industry that saved their livelihood, especially with those short-term careers like air
stewardess industry and odd-job labourers. With low barriers of entry and minimal 3 GCE O’
levels passes, the real estate agent industry provides an opportunity for those who needed a
switch of a career and a livelihood.

c) High Demand for Marketing Agents

With its lucrative commissions and increasing labour demand (as shown below), every year,
licensed agencies will be looking forward to employ enthusiastic recruits into the industry all
year round with their profit sharing motives as well.

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 Figure 1: Job vacancies among services
Source: Jobs in Demand 2007, Manpower Research and Statistics Department

Figure 2: Top 10 Occupations in 2007

Source: Jobs in Demand 2007, Manpower Research and Statistics Department

d) “Be your own Boss” in time management and entrepreneurship

Unlike a 9-5 job, the work of a marketing agent depends very much on individual and its
clients. Employees are not tight down by its rigid working hours, rather he/she can arrange
time with his clients on house viewing. As the agent meets people from all walks of life,
he/she is able to assess into greater business network and to extensive resources.

Weaknesses and Threats

a) Sales/income easily affected by gloomy property market

Although the income could be lucrative based on the number of closures, property agents
could be badly hit by the poor economy when the market is down. When properties prices
are too high and sellers found harder to sell and buyers found too expensive to buy,
foreclosures are extremely hard to come by each day. Solely based on the commissions,
agents’ livelihood are likely to be affected.

b) Low barriers of entry

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Where low barriers of entry create opportunities, it acts as a double-edged sword and poses
a problem as well. This also results too many agents in the industry where there is high
competition, i.e. one property, many agents fighting for foreclosures, it turns out to be a
throat-cutting business.

c) Unglamorous Job

Low barriers of entry into the industry have further incurred problems to the image of the
occupation. With employees from all walks of life, education level and different backgrounds,
sometimes there could be some black sheep among the agents offering poor services or
misrepresenting facts. When one thinks of a marketing agent, he/she would be stereotyped
to be “unprofessional”, “unremorseful liar”, and having local names like, “Ah Beng/Ah Lian
Agent”. Such terms turned marketing agent to become a pretty unglamorous job which is
occurring not only in Singapore but in a lot of regional areas.

d) High turn-over rate of agents

With a saturation of too many property agents in the market, many could quit the industry or
even forced to leave especially during market downturn where everyone’s fighting for a bowl
of rice. Although it is not a 9-5 job, some agents find it unfavourable as they have to “burn”
their weekends working in the show flats and bringing their clients for house viewing and
resulted spending very little time with their family. Most agents quit the job due to family
commitments.

During the transition period where new players came in, there could be not enough
professional agents to “hold the fort” due to high turn-over rate.

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5. Product Development
The Strategic Planning

The products/services could be further developed in the existing market. Other than
improving and enhancing the existing services in the current market, the approach is also to
bring in new services/ideas into the market consisting of highly innovative marketing ideas,
effective marketing tools, wide networking and creative & systematic training.

a) Comprehensive and intensive in-house courses

With the phrase from John Donne, “No Man is an Island”, marketing agencies should make
their employees stay cohesively together as a team by making our employees (agents) as
consumers of their products/services as well as going through a comprehensive learning
process.

Marketing agencies should conduct in-house real estate courses for the new agents which
includes compulsory examinations and certification (accredited by SISV2), attire grooming
and toastmasters. While improving the agents’ proficiency in English speaking and writing,
the Toastmasters will give agents the skills & confidence they need to effectively express
themselves in any situation which have proved to be the most efficient, enjoyable &
affordable way of gaining great communication skills.

The agents should also be taught on handling customers’ complaints from attending National
Skill Recognition System (NSRS) courses. Further training in negotiation skills and legal
knowledge will be on the advanced level for agents who had stayed for 1 year and with
improving performance. Such trainings will prepare them for a higher level when dealing
clients who are more demanding. IT-courses will also be conducted on agents in creating
their own websites, presentations etc.

b) Build up a strong clientele network

Existing Markets of agencies like ERA, Dennis Wee, PropNex, Orange Tee, etc are focusing
on buying/selling/leasing of the public and private housing on the existing development. For
the private housing on new development, developers will either invite a few marketing
agencies to help market their properties or give sole agency rights to one marketing agent to
do the marketing. Therefore, marketing agents should expand their networking with the
developers so that they could get the sole-agency rights to market the whole housing
development. In order to expand their networking with the developers, agencies need to
build up their reputation in the property market industries so that developers will have
confidence to give the sole agency rights to the marketing agency to market their properties.

Other than building a strong clientele, market agents should also keep in contact with past
clients and update them of any news of new property launches while getting to know new
clients.

c) Create a useful net portal

As customers are becoming more IT savvy, they are likely to search for properties online
more often. With a net portal featuring all services available online as well, marketing agents
could put up their advertisements for a small fee, exchange ideas and communicate through
personal messaging (PM) services in forums.

2
Singapore Institute of Surveyors and Valuers represents local land surveyors, quantity surveyors, valuers, property
managers, property consultants and real estate agents at the professional level.

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The net portal also provides one-stop services for the clients, achieved by putting up
information of data and research on all banks loan available in the markets, the price range
of lawyers’ fees and transacted prices of past sales and rentals.

The agency can also put up market research quarterly reports in the website (with
disclaimers), with buyers guide to properties and residential property reviews. User-friendly
online tools such as loan calculator, portrays ball-park figure to the mortgage payment,
allows interested buyers or first-timers to know more about property before investing in their
first home. Interesting articles can be put up to showcase the hottest properties and updated
launches in the market informed buyers of the latest trends in properties.

d) Value-added services

The marketing agents could offer marketing consulting services for its big clients like
developers, especially in new property launches. They can help to come up with marketing
proposals in promoting and perceiving buyers’ behaviour in the product by working together
with the builder in the show flat, advertisements, brochures and special promotions. The
agency should also cultivate the agents to be customer-focused, provide value-added
services like sending our clients back home after viewing.

Most importantly, marketing agents should also help the seller to “screen” potential buyers
who are really genuine buyers so no time is wasted especially when buyers want to sell their
property fast.

e) Franchising own set of Sale/Lease agreements, training modules and services

When all the above in place, the marketing agency could set up its own franchise on its
agreements, courses and services patented and establish its philosophy of business in the
trade. Protected by the patent, this business will be sustainable and continue to incur
revenue for the firm where other agencies even from the regional areas will have to pay a
royalty to the franchise and carry out the same practices.

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6. Potential Ethical Issues and Problems

a) Misrepresentation

The most common complaints against housing agents are about poor service or
misrepresenting facts. In Singapore properties markets, the property agents do not need to
be certified to becoming an agent. They used the company license to practice as a property
agent. Therefore, agencies recruited a lot of new staffs by providing short courses of about 2
to 4 weeks. Thus, property agent industry flops with a lot of agents with very little knowledge
in the property market. As a result, these non-skilled agents might either misled or provide
misrepresented information to their clients which caused a lot of unhappiness to the clients
and in turn tarnish the agency reputation.

b) Unethical agents working for their self-interests instead of the client’s’

As the income based a lot on commissions, agents who want to pocket both the seller's
commission and the buyer's fee may refuse to co-broke. This greatly reduces the number of
viewings that a seller may get for his flat. A recent case would be, Mr X could have received
$7,000 more from a higher offer for his HDB flat, but ended up getting $438,000 because his
agent did not tell him about an offer that came from another agent. As a result, Mr X lodged
a complain to the Consumers Association of Singapore (CASE) or IEA about the unethical
agent who had not managed to get him a better deal because he does not want to share his
commission in the co-broking and resulted Mr X not getting the better offer for his flat. The
unethical agent has obviously worked on his own interests instead of his client’s.

Cases like this are getting more common, with CASE receiving 57 complaints from January
to July this year, up 32 from the same period last year. Experts believe some agents are
rushing to seal deals and cutting corners. Tenants are not spared either where expatriates
working in Sngapore have also failed to get a rental home thrice because agents upped the
price even after he/she had signed letters of intent or handed over cheques for the rental
deposit.

Although not all agents behaved unethically, a few bad examples is enough to sink the entire
ship, giving people the impression that agents are unscrupulous, not customer-focused, get
all means by hook or by crook to lure clients to commit sales. Currently there is no regulatory
body to enforce accreditation of property agents, although the Singapore Accredited Estate
Agencies (SAEA) aims to have all agents accredited by 2009.

c)“Free-riders” problem
The group who stayed with the agency for more than 1 year and without closing any deals
are seem to be the riskiest for consumers as they may not be as updated on industry
changes. There is also possibility that this group may not be declaring their transactions,
which poses a problem when consumers consult the agency and find that there are no
records of the deal. Consumers are not protected in terms of professional standards
provided by the agent therefore there is a lot of concern and a call for industry to be
regulated.

d) High costs incurred for conducting courses for agents

Due to no educational barrier to entry, anyone can join the industry. Typically, training is only
provided if the agent joins a relatively big company where there is some structure in place.
Courses may be very costly. Employees may not have the starting income to attend the
courses held. This resulted some of them to give up in the midst of training.

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7. Recommendations

Currently, only agencies are licensed The Institute of Estate Agents (IEA) has also been
pushing for second-tier licensing, but to no avail. Entry barriers are strongly needed where
Government should intervene by setting rules that all the property agents should either have
a certificate in Common Examination for House Agents (CEHA) or a diploma/degree in real
estate. With the certificate, it aims to raise the standard of professional services by qualified,
trained and knowledgeable real estate agents. Like the ISO 9000, the agencies should have
audited their staffs to ensure they are qualified and equipped with current property
knowledge. In this way, the information provided will be accurate and prevent any
unnecessary misrepresentations.

A lack of direct and stiff regulation for housing agents has allowed the existence of what
some industry players call "cowboy" agents, who profit by flouting rules, and leaving
customers and their agencies to deal with lapses. Thus it is important to set up regulations
and heavily penalize these unethical agents through black-listing, giving awareness to
clientele and trash out these “cowboy” agents. Net portal created could also be avenues to
give redress to consumers who have problems with their agents and also could showcase
good, ethical property agents, through rewards, news articles etc.

Some big players in the industry have self-regulated in terms of conduct and responsibility
while waiting for Government to intervene. For example, instead of firing those non-
performing agents who stayed with the agency but without closing any deals, this group
were first given a choice to remain as Prop Nex agents by signing up for Professional
Indemnity Insurance as well as a refresher course. Professional Indemnity Insurance should
be imposed on every deployed marketing agent. If all other professionals such as lawyers
and doctors are subjected to Professional Indemnity, it is only right that marketing agents are
covered as well to protect the interests of consumers.

To lessen the unhappiness of customers engaged with unprofessional and unaccredited

agents, IEA has removed its commission guidelines in September 2008 and paved the way
for industry players and real estate agencies to set their own commission guidelines. This
has further intrigued customers is to do their own due diligence when engaging their next
real estate agent and has strongly encouraged them to choose a professional real estate
agent and is also a member of IEA.

Government should come up with a ranking system on all marketing agencies based on their
portfolios and auditing results. With ranking, agencies will upgrade their agents with the
property market knowledge and provide more excellent service to the clients. Developers will
also benefit by selecting reputable agency to market their development. With the high costs
incurred for training, Government could give subsidies to these employees in attending
courses in the agency.

With all these recommendations and with Government’s intervention, the image of marketing
agent will slowly change from unethical, unscrupulous to a professional, customer focused
and knowledgeable occupation. Although it will not happen overnight, with its bold and
courageous overhaul of its current situation, the changes will eventually change our
consumers’ negative perception on marketing agents to a positive one.

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8. References

Institute of Estate Agents website

http://www.iea.org.sg/

Dennis Wee Group

http://www.denniswee.com/

PropNex
http://www.propnex.com/

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