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  • Aaron Lin Property

What is CO-BROKING? A breakdown of CO-BROKING from Aaron's experiences!

Disclaimer note: Article's content is based off Aaron's personal opinions and experiences for sharing purposes.


What is co-broking? how does it work? Who does it benefit and why? All these are discussed from Aaron's experienced point of view.



Summary: Co-broking involves buyer agents getting their commission from the seller agent, which creates potential problems of buyer agents not acting in their client's interest. Ideal scenario is when the buyer & seller pays their respective agents, like in the cases of HDB transactions.


Read on for the details of the potential problems and the mechanics of how co-broking goes.

 
What is Co-broking?

To start off, we will discuss the definition of Co-broking in Singapore, from the point of view of an agent. Co-broking is the act of buyer agents (BA) reaching out to a seller agent (SA) to broker the deal. When a BA asks to co-broke, the BA gets a co-broking commission from the SA.


This works in a similar way for rentals too. But there are situations where if the SA does not earn a lot from the rental deal, the commission could be paid by the renting tenant.


In HDB transactions though, even though there is co-broking, the agents are paid by their respective clients. That is, seller pays SA, buyer pays BA. This makes the transaction easier and more direct, without the sharing of commissions.


3 way Co-broking

Logically, a co-broke deal should involve 2 agents, the BA and SA. However, Aaron has also heard of a situation known as 3 way co-broking, which involves another agent introducing the BA to the SA.


For the record, Aaron considers 3 way co-broking 'bullshit' and have never, nor will ever do such a deal. It's silly to him mainly because the property advertisement is easily available on platforms like propertyguru, and it just shows the lack of resourcefulness of the BA in creating a rather ridiculous situation.


Co-broke Culture

The co-broke culture in Singapore is as such mainly due to the following process in a property transaction:

  1. Buyers don't pay commissions to their agents, and thus

  2. the BA has to ask for a share of the commission from the SA

Logically, the co-broking commission should be determined by the SA upon the BA's approach. However, there are many BAs who upfront ask for a specific amount of commissions, say 1% with GST. Otherwise, they might ask for an increase or question the commissions offered by the SA. For example, asking for 1% when quoted 0.5%.


This practice of asking for more or quoting a specific amount is just exasperating to Aaron and is a product of the culture established in Singapore, which Aaron is definitely not a fan of.


Problematic situations

Since the BA earns a commission from the co-broke deal, it is just logical that the BA does his/her fair share of work serving the buyer. This however, is not always the case. Oftentimes, agents meet direct buyers who come into a transaction and seemingly do not have an agent working for them.


In such a scenario, the SA would do their best to assist the buyer since it's in the seller's interest for the deal to close. The SA would answer any queries, even advise the buyers, solving and issues or challenges to facilitate the deal. BUT, this help rendered is taken advantage of eventually.


A lot of work is done to help both seller AND buyer in coming together, and when the day of closing is here, the buyer drops the bombshell, "I have an agent that wants to co-broke."


More often than not, this agent is a relative or a friend of the buyer, who does not appear or show any hints of existing until it's time to hand over the cheque. This raises so many questions:

  • Why was the buyer agent not doing the work in the first place?

  • Why was BA not calling for viewing?

  • Why was BA not advising on financial calculations?

  • Why was BA not explaining the transaction timeline to the buyer?

Such a situation frustrates SAs to no end. Does the BA deserve the co-broking commissions then?


Advice for buyers & agents

Based on the above, it's obvious that there are BAs which ask for a higher co-broking commission than the SA is willing to give. In such a situation, the SA might check with the seller about the commissions. What usually happens in such a case is that the buying price is then increased to reflect this increased commissions to be paid.


Essentially, a BA asking for more commissions is akin to the seller increasing the asking price. So is the BA actually working in the interest of the buyer if the buying price is increased?


Therefore, to avoid this situation, maybe it's best for the buyer to pay the BA direct, just like HDB transactions, to avoid any conflict of interest and the BA acting against the buyer's interest.


For agents, the advice is this: Once you have decided to take up a job and serve a client, the most important thing is to work in the interest of the client and close the deal. Instead of counting the dollars and cents, just help the client and move on. Do not recommend something just because you get to earn more. For SAs, this is the case since exclusivity forms signed with the terms of commissions agreed upon with the sellers in the first place.


Ideal situation

The ideal situation is one where the buyer and seller of any property transaction pays their respective clients for the service rendered. This is just like how HDB transactions are done. This ideal situation would eliminate conflict of interests and save on many frustrating situations for agents who are serving their clients.


Conclusion

There are buyers & sellers alike who are confused or unaware about how co-broking works and hopefully this sheds some light into some of the industry practices. It's more important that agents act in the interests of their respective clients.


To Aaron, it's perfectly okay when a BA asks to co-broke a deal and accepts the commission being offered by the SA and then works together to close the deal. But when the problematic situations of co-broking occur, we question the culture and current industry standards.


 

Watch the video to hear from Aaron directly and leave your comments and thoughts on co-broking!




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