Imagine for a moment the Singapore property market without any property agents. Some would argue that this would make the industry disastrous; others would cheer and say that the industry would not only be more efficient but also be more value-driven.
For years now, the internet has disrupted many industries, and the FIRE sector (finance, insurance, real estate) is no exception. Many believe that this sector is parasitic in nature, charging exorbitantly high fees and delivering little in terms of value while producing absolutely nothing. Just as we’ve seen the rise of Direct Purchase Insurance (DPI) through CompareFirst which started last year, now comes DirectHome, a portal in which you can buy, sell, and rent properties directly without the middlemen (i.e., the property agent), potentially saving you both time and money.
In the US, FSBO (For Sale By Owner) has been around for decades, but its popularity is not all that great. This is mainly because real estate agents still provide a good amount of value to their clients, primarily in the form of helping their clients with the particulars of the contract (the contract in the States is a mountain of somewhat complicated paperwork which has important clauses and deadlines), with market analysis, and with financing (particularly with federal loans and other such programmes). In addition, properties in the US vary widely in style, type, age, size, and condition. And each region has different property laws and regulations.
For example, I’ve seen homes that have been used as methamphetamine labs. And homes where there were hidden major defects such as a cracked foundation or mould- and roach-infested walls. An experienced real estate agent would be able to advise on such matters, as they pertain to price, repair costs and permits, and regulations.
But here in Singapore, homes are more uniform, especially HDB or condo flats. Transactions are also done through an attorney (whereas in the US, the majority of transactions are solely through property agents).
In addition, properties sold in Singapore are sold on an “as is” basis, whereas in the US, if the buyer has a mortgage, (in general) there are certain minimum standards that must be met before the transaction can proceed. The property history and sales data in Singapore is also quite transparent; you can get past sales data through HDB and URA, and even an instantaneous valuation of your property through SRX’s X-Value™ Appraisal.
For all these reasons, direct transacting can be a cost-effective alternative, since most sellers are more than capable of doing what traditionally was done by property agents – taking photos, providing details on their home, and setting appointments for viewing. For areas in which an agent might be helpful, DirectHome provides assistance. They provide you with a market valuation of your property based on the most comprehensive property database using best practices methodologies. This includes a comparable market analysis, which will help you to price your home. They also have streamlined the entire transaction process and will guide you through each step. And they will support you until the completion of the sale/renting of your home.
What does it cost to list with them?
A fixed fee of $800 for Selling and $80 for Renting. No other costs, and you don’t pay until your transaction is complete!
How much can you save?
For sellers, based on the sale of a $400,000 HDB, with a traditional 2% commission ($8000) DirectHome saves the seller $7200. Based on the sale of a $1,000,000 condominium, with a 2% commission ($20,000), DirectHome saves the seller $19,200. For landlords, a one- to two-year lease rental of $2000/month with commissions of $1000 to $2000 could mean a savings of $920 to $1920. For buyers and tenants, using DirectHome is free.
Transacting DIY means you don’t have to go through an intermediary, which means more efficient and less redundant communication. Also, you can schedule viewings more easily without the need to wait for a third-party (i.e., the property agent). The listing also never expires and you can edit and adjust pricing as the market evolves and changes.
Should You List with Them?
If you’re thinking of selling or renting your property, and are not sure whether you should engage an agent or seek a lower-cost alternative, you can possibly do both. You can still list your home through DirectHome so long as you are not in an exclusive agreement with an agent. If you or DirectHome procures a buyer (and you are in a non-exclusive agent agreement), then you won’t have to pay commission to the non-exclusive agent. If you are listing your home on DirectHome, I would also recommend you list it in other alternative sites such as craigslist and Gumtree (why not, they’re free).
Should You Buy through Them?
Right now, there aren’t that many listings on their portal, but I suspect that they will gain more and more popularity in the near future as property prices continue to fall and technology continues to disrupt the industry. Their portal also lacks some helpful features, which makes the user experience not as good as other sites like PropertyGuru and SRX. But one really nice thing about DirectHome is that since you (as a buyer) know that the seller is saving on commission, you can probably make an aggressive lowball offer (many agents are simply too reluctant to do so as it might offend the seller and it is not in their best interest).
In my experience, negotiating through agents is very inefficient and can also be frustrating. Sometimes agents play games such as withholding information (such as unit number, prior purchase price, etc.). Or, they only show you properties that result in the highest commission split.
Nowadays, individuals have nearly as much access to information as property agents. And all that information is instant and doesn’t cost a thing. There was a time where the role of the agent added much value to the real estate transaction. But now, it seems that many things they do, the home owners and home buyers can easily do themselves. I am NOT saying that all real estate agents are useless and dishonest.
The direct real estate transaction model isn’t for everyone. There certainly are excellent real estate agents out there that add exceptional value and work with the best interest of their clients in mind. Likewise, many people may feel uncomfortable transacting such large sums of money without more personal guidance. The cost of properties in Singapore is still quite unaffordable for most people (with the exception of BTOs). And this portal helps to remove some of the bloat in the FIRE sector, which hopefully results in making housing more affordable to all, as it should be.
It is still unlikely that the direct property transaction model will make property agents completely obsolete. But hopefully it will put pressure on them to add more value and provide better service.