Dealing With Estate Agents
In your quest to find your ideal home or that investment opportunity, you will most certainly come across signboards or advertisements for sale whether in print or online. And more often than not, these are placed by ‘agents’. Who are these ‘agents’ and how do you work with them towards your goal of finding your ideal home or investment property?
The term ‘agent’ is widely used as a simple term to represent the sales person involved in the estate agency transaction. When you come across an ‘agent’, first verify if he or she is a Registered Estate Agent or a Negotiator of the firm. What is the difference?
Estate Agents
The truth is, not everyone can become a registered real estate agent. In the past, due to the lucrative nature of the business, many people got involved in real estate transactions to make quick monetary gains. This rampant and unregulated practice led to many problems which eventually led to its regulation.
There are approximately 2,100 agents registered with the Board of Valuers, Appraisers and Estate Agents. The Board is a regulatory body of the Estate Agency Profession. It comes under the purview of the Ministry of Finance and is governed by the Valuers, Appraisers and Estate Agents Act 1981. Its primary function is to regulate the Valuers, Appraisers and Estate Agents practising in Malaysia.
Presently, all practising estate agents must be approved and registered with the Board and their yearly renewal of authority to practise is subject to a minimum of 10 Continuous Professional Development Hours (CPD). This is mandatory to ensure that Registered Estate Agents are current in their practices.
Estate Agents are simply registered agents with the Board. They provide a service in buying, selling and leasing properties for clients so that optimum returns can be achieved.
On the other hand, Real Estate Negotiators are the people who are employed by Registered Estate Agencies, who are out there in the field representing the Real Estate Agents on a daily basis by making representations to the Vendors, Purchasers, Landlords, and Tenants. Their role include collecting money, drawing up the basic terms and conditions and finally concluding the sale or lease and by doing this, he or she is paid a commission by the Principals or Directors of the respective firms. The Negotiators are expected to be regulated by the firms that employ them. In most instances of a breach of law by any Negotiator, the Principals or Directors will be primarily held responsible by the Board.
In simple terms, the Estate Agent either owns or manages the Branch with Negotiators as team mates in the business.
Then you need to check up on the Agency the ‘agent’ is representing. i.e. ABC Realty. You need to verify if the firm is indeed an Estate Agency listed as a registered company with the Board. This is important as only Registered Estate Agency firms can hold themselves out to the public to perform the duties of a real estate agent for a fee.
As defined under Section 22C of the Valuers, Appraisers and Estate Agents Act 1981, only a registered estate agent can practise, carry on business or take up employment as an estate agent. No one else can operate under any name, style or title that uses the words “estate agent”, “house agent”, “property agent”, “land agent” or the equivalent that would imply that he is a registered agent.
Non-registered agents cannot display any signboards or circulate any cards, letters, pamphlets, notices or advertisements that imply that they are registered estate agents, nor can they undertake any work that involves real estate transactions. Only registered estate agents can prevail in court to recover any fees, charges or remuneration for their professional advice or services rendered as an estate agent.
An illegal estate agent can be punished by law, under Section 30 of the Act. On conviction of an offence under the Act, they are liable to a fine not exceeding RM25,000 or imprisonment for a term not exceeding three years, or both. He shall also be liable to a further penalty of RM500 for each day during the continuance of such an offence.
To avoid getting scammed by pretenders, the general public can verify the authenticity of the agent by their registration number. Each registered agent is given a number with the prefix “E”, e.g. E 1712. A real estate firm also has an E number, e.g. E (1) 1081, which is the registration number of the firm with the Board. This number must be displayed in all communications from the firm.
You can also search by company name i.e. PROPERTY TALK or by the Registered Estate Agent’s name online at the Board’s website
As for Negotiators, not all negotiators practising are registered with the Board at the moment. It will be a good idea to call up the office of the estate agency to verify that the negotiator is indeed working with the firm and authorized to represent the company in real estate transactions.
Check on Agent’s Authority
Be sure to check that the ‘agent’ has the necessary authorization from the owner of the properties to secure buyers or tenants for the properties. This is usually by way of a Letter of Authorisation (LA) or by way of a form signed by the owner. This form authorizes the negotiator or estate agent to act based on the instruction given by the owner as to the property details and price, and to transact the sale. You really do not want to be in a situation when you are all excited and ready to make the purchase to later discover that the owner does not have any intention to sell and was merely testing the market.
Earnest Deposit
When you are ready to make an offer to purchase the property, it is best to have the earnest deposit made in the name of the agency, once verified, in the form of a cheque payable to the firm’s name and be sure to secure documentation that reflects the payment of such monies together with your offer usually in a form identified as an Offer To Purchase or an Agreement To Purchase/Rent.
Earnest deposit, simply put, is the consideration consisting usually of a small amount of money compared to the offer price, usually between 2 – 3% of the offer price, to confirm your seriousness to purchase the property at the offer price subject to the seller’s acceptance. It is a good precaution not to give cash as payment of the earnest deposit.
This earnest deposit is then deposited into the clients’ account of the estate agency and released to the relevant parties upon the execution of the Sale & Purchase Agreement. This clients’ account must be properly monitored and audited. The Board views the fiduciary duties of the estate agent very seriously. Breaches are dealt with severely. There are strict rules on how a client’s account is to be operated.
An estate agency firm is also required by law to have professional indemnity insurance. The policy protects the insured against any claims for damages that may be made against him for breach of professional duty, by reasons of negligent act, error or omission in his professional capacity. In short, the insurance company covers the claims up to the sum insured.
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