Property

Understanding the Role of a Property Agent



Even with new stamp duties, real estate sales go on, so understanding the role of a property agent is more crucial than ever

Whether buying or leasing, chances are you’re going to need the services of a property agent one day. Agency offices are nearly as omnipresent at 7-Elevens, so finding an agent isn’t the hard part. Finding a good one and understanding what they’re supposed to do is more complicated.

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Know the Rules

As of November 2016, the Estate Agents Authority (EAA) stated 40,317 real estate licences were issued in Hong Kong, with 17,133 of those going to individuals and 3,318 for companies. However, there were an additional 19,866 “salespersons” on record.

The key difference between a licensed agent and a sales agent is whom they can work for: licensed agents can work alone; sales agents must work for a licensed agent or agency. Licences are not required for sales agents whose property is outside Hong Kong.

“The difference between the two can be marginal as far as knowledge is concerned,” said a licensed Mid-Levels agent, who wished to remain anonymous.

However, “Salespeople tend to be hires that may be studying for the agent’s exam, and are truly interested in a longer career. Others are looking for work, or sampling the field. They’re often on salary and less concerned about commissions. Salespeople are usually the ones you see hanging around ifc with brochures around the time of a project launch,” the agent explained.

One of the peculiarities of Hong Kong’s property sales industry is what is referred to as “dual agency,” wherein a single agent can represent both the vendor (or landlord) and purchaser (or tenant). In some jurisdictions, dual agency refers to two separate agents working for the same company, one representing the buyer, the other the seller.

Dual agency involving one agent and two parties is illegal in Singapore, eight states in the Unites States (including Texas and Florida), and it is extremely limited and frequently subject to litigation in Canada. In most locations it is allowed only with full disclosure – which is the case in Hong Kong.

“If the estate agent appointed by you represents the other party as well, the agent must make that clear in the estate agency agreement. If you do not want your agent to be a dual agent, you can make such a request when appointing the agent,” according to the EAA.

The Royal Institution of Chartered Surveyors (RICS) members are prohibited by RICS’ code of ethics from dual agency.

Agent commissions are shared with the agency they work for (if applicable), which goes a long way to explaining aggressive sales tactics.

As a point of comparison, agent earnings run between 4% and 10% in France (and many parts of the EU, sometimes in addition to VAT), 6% in the US and Canada, up to 3% in the UK, and about 2% to 3% in Australia.

Most locations in Asia charge roughly 1% on sales and one month’s rent on tenancy agreements (Japan and Thailand excepted, which charge 3%), but that is not, in fact, set in stone.

“The law has no stipulations on the amount or the rate of commission an estate agent is entitled to. It is subject to negotiation between you and your appointed estate agent,” according to the EAA.

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Not a Must

Nor does the law say you even need an agent. Private sales and tenancy agreements in Hong Kong can be completed without help from an agent. Standard agreements can be obtained from the Lands Department, and a good solicitor for both vendor and purchaser can facilitate a private sale. But in both cases there can (and should) be a lot of legwork involved, leading most of us to accept the services of a licensed agent.

In Hong Kong, there is no governing industry body with significant legal power for industry oversight. The EAA is a voluntary watchdog that aims to establish a code of conduct for agents to comply with – with the operative word being voluntary.

As Hong Kong real estate writer Chris Dillon notes: “It’s a self-regulatory body, so you can figure out whose interests they’re looking out for. And you can quote me on that.”

Which doesn’t mean there are no excellent agents to be found. The easiest way to do this is by, “Asking friends and co-workers to recommend agents they like or trust,” advises the Mid-Levels agent. Even as it stands, the EAA keeps a database of agents with valid licences – and limited details on complaints – making it a good place to start if you’re truly new to town.

So what makes a good agent? The first rule is communication.

“Any agent should really be listening to what their client says. If a rooftop is a deal-breaker, don’t show what you think are nice flats without one. It’s the client’s prerogative to see it anyway, not ours,” says the Mid-Levels agent.

Duties an agent discharges include discovery and disclosure of any outstanding work orders, court orders or other encumbrances on a property, marketing, facilitation of viewings, helping with utility registrations in rentals, and occasionally liaising with landlords after the tenancy agreement is completed as a start.

They are also on the hook to bring the best offer to their client – whoever it is and in whatever capacity – sale or rental offer.

Ultimately, “A client shouldn’t need a solicitor to do title searches and other basic due diligence. That’s our job,” finishes the agent from Mid-Levels. “As the saying goes, the customer is always right.”