WHO PAYS THE REAL ESTATE COMMISSION? HOW DOES AN AGENT GET PAID?

WHO PAYS THE REAL ESTATE COMMISSION? HOW DOES AN AGENT GET PAID?
To understand who pays real estate commissions -- whether it's sellers or buyers or both or if it is Landlord’s or Tenant’s or both
First take a look at how real estate agents are paid and how they share cooperating commissions. Don't be embarrassed if you don't know how commissions work because I've had clients who didn't know, even though I had sold their home, represented them to buy a new home and then later listed that home for sale.

How Real Estate Commissions Work
Most Real estate agents work for a real estate (broker) company. There are some who work for companies floated by them selves.
All fees paid to a real estate agent pass through this company.

How Are Real Estate Agents Compensated by the Company?
Divisions vary. All Agents work on a commission scheme that is determined by the experience, performance and various other factors such as recruitment etc. New agents can receive from a range of 60%-70% of the total commission received by them from the closure of a deal.
Top producing agents might receive 100% and pay the company (broker) a desk fee. Everybody else falls somewhere in between.
One has to understand that the real estate agent has a lot of expenditures like advertising, sign rentals, money spent on transportation, entertainment or office expenses. Most people think that the companies pay their agents, but actually it’s vice versa. The agents earn and pay the company. The company in turn gives them the security of being under a big banner (a Brand name), Gives the real estate agent an identity as a representative of the company, Gives them requisite trainings/ updates from time to time. The luxury of working in a group and sharing ideas, Using the Company premises and its facilities like phones, PC’s and the various paid software which will aid the real estate agent in his business. These are given free to the agents thanks to pooling of resources. One of the most highlighting factors of being associated with a company is the Legal Aid.
In Singapore Legal expenses are very high. Incase of a problem with any deal, if there is a legal issue the real estate agent can consult the in-house company lawyer for free and sometimes if it is very complicated for a very subsidized amount. It’s no wonder that real estate agents choose to work with big companies.

COMMISSIONS RELATING TO PRIVATE / LANDED PROPERTIES IN SINGAPORE
The below listed scenarios happens only in Private/landed properties and not in HDB properties.
Listing Agents' Fees
The most common type of listing agreement is:-
Between a seller and her agent or Between a Landlord and his tenant, this gives that agent's broker the right to exclusively market the home. In return for bringing a buyer to the table, the seller agrees to pay a commission to the broker.
Typically, this fee is represented as a percentage of the sales price and is shared between the listing broker and the broker who brings the buyer.
There is no guideline from CEA regarding commission rates charged by agents:-
Kindly refer to the FAQ section of the CEA website-www.cea.gov.sg
Q.6. Will the new regulatory regime increase compliance cost for the industry and would such costs be passed on to consumer in terms of commission? How were the licensing and registration fees determined?
A6. The regulatory cost for industry will go up with the additional resources required to carry out the increased regulatory work and the stepped-up enforcement actions. However, the fees charged are tiered based on the size of agencies to reflect the expected additional regulatory work for the larger agencies.
Commissions charged by the salespersons are influenced more by the demand and supply of estate agency services than by the compliance costs. Consumers are encouraged to find out the different commission rates and they can negotiate the commission rate before engaging the estate agent.

Q28. Will CEA regulate the commission rates under the new regulatory framework?
A28. CEA will not fix the commission rates charged by salespersons as the absence of commission guidelines would lead to a more competitive pricing among the estate agents. Consumers are advised to find out the different commission rates and they can negotiate the commission rate before engaging an estate agent.

This, I feel is not fair as customers tend to negotiate or ask for discounts. One must understand that Real estate is a profession and has its expenses, pressures and many a households are run on this income. If they keep this market competitive what will happen to the full time agents who depend on this income? A person who is doing well can offer discounts and grab the business from under the nose of a needy agent. If the commissions are set, it will be fair to the Real estate agents as well, as they can always quote that this amount is set by CEA and people cannot evade paying them. There have been many times that colleagues tell me about customers cheating them or customers who pay less. Of course they can seek redressal through the lawyer representing their company but the relation with that customer who didn’t pay or paid less sours.

Co-Broking / sharing of commission
Seller Pays the Buyer's Broker Commission through his listing agent. Under a Buyer's Broker arrangement, the named brokerage and agent represent the buyer. The fee paid to the broker most commonly is paid by the seller. Some buyer broker agreements contain clauses that will compensate the brokerage for the fee it is due less the amount paid by the seller.
For example, a cooperating listing might offer to pay a broker only 0.5% of the sales price, whereas the brokerage operates at fees of 2%. The difference of 0.5% could be paid by the buyer if the broker chooses not to waive that amount.
In private properties in Singapore many a times the buyer / tenant doesn’t need to pay commission. In this scenario who pays the agent who is representing the buyer/tenant. The sellers/landlord’s agent shares half the commission with the buyer/tenants agent.
This has been a market practice but is not necessarily a rule. The market is highly volatile and scenarios keep changing based on the demand and supply for housing at a particular time.
There are many cases when the Seller/landlord’s agent refuses to pay the buyers/tenant’s broker. In this case who will pay the broker who represented the buyer/tenant?
So, we must understand that there are no rules or regulations in this matter nor has CEA set any guidelines for this.
The poor agents must fend for themselves. When they end up asking the buyer/tenant a commission for their services, the buyer/tenant will just tell him that according to the market practice they need not pay. Who will pay this agent for his time and efforts? Who will this agent approach?
These are some things which have not been made clear by the CEA, the market, the broker companies or the people.
Hence many agents let the buyers/tenants know much in advance that although it is not necessary to pay at all times, there may be a situation when the buyers/tenants have to pay a commission to their representative agent.
We have seen that listing agents are more co-operative and happy to co-broke with agents with whom they don’t have to share the commission.
Then again, Divisions of fees among brokers is not always fair or equal, just like life.
For example, a seller could sign a listing agreement for 2% that stipulates the listing broker will receive 1% and the co-broking agent will receive 1% from the selling broker. It's not always a 50/50 split.
In a buyer's market, sellers might want to consider asking the broker to give a larger percentage to the buyer's broker.
In a seller's market, the buyer's broker might receive less.
There is no set formula. This is based on the demand and supply conditions in the market.

Who Really Pays the Commission?
It can be argued and, quite rightfully so, that in the end it is the buyer who always pays the commission. Why? because, it's typically part of the sales price.
If the seller did not sign an agreement to pay a commission, the sales price might have been lowered. And therein lies the appeal of buying homes through unrepresented sellers (Sale by Owner) because, given the same logic, those prices should reflect a net sales price without a commission. But most people in Singapore know that Direct Sellers always ask for phenomenally high prices instead of closing at a lower price. They quote high prices because they believe that agents will not represent their house as well as they can do it, they also believe that agents cannot get the highest price that they are expecting for their home or want to avoid paying agent’s commission. Then again is the challenge for this set of people for doing the documentations on their own, this is quite detailed in Singapore.
Most of these unrepresented sellers eventually sell through agents as they can’t handle the pressure of people viewing their house, commenting upon their house, rejecting their homes or offering very low prices.
A seller always wants the highest price for his house and the buyer is always looking for the lowest price or the best deal while buying.
Sellers usually oversell their house and highlight the strong points so that they can impress the buyers and buyers always look for the weaker link to be able to reduce the price. Agents usually do the balancing act and enable deals to be closed.
The unrepresented sellers haven't quite figured this out yet which causes potential buyers of those listings to be consistently disappointed.
Using the services of an agent is a win-win situation for both Sellers/Landlords and Buyers/Tenants. As each is being represented by a competent person who knows the rules and regulations, the documentations, the entire process without any hassle to the concerned parties and will take care of the respective vested interests with respect to the ever changing laws in Singapore.  
To help alleviate much of this confusion, don't be astonished if over the next 20 years sellers and buyers each retain their own representation and pay separately for said representation.