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Property Agent Commission in Penang

Property Agent Commission in Penang

Old Aug 28th 2022, 1:15 pm
  #1  
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Default Property Agent Commission in Penang

I recently made an enquiry on a property in Penang, an apartment that had caught my eye. I went along to view it and was quite interested. While discussing the price with the selling Agent she mentioned that I would have to pay her a 1% commission. I was surprised to hear this because I've purchased property in KL and the Agent commission was paid by the seller (the owner). But she insisted that "in Penang it is different - the seller pays 2% and the buyer pays 1%".
I made inquiries about this afterward, and it seems to be the standard practice indeed. But I have major issues with it, and it really puts me off the whole idea of buying anything in Penang.

Having returned home to KL I wanted more info on this peculiarity, so had a look for a 'governing body' for property agents in Malaysia, and indeed there is one. It is 'The Board of Valuers, Appraisers, Estate Agents and Property Managers', or LPPEH for short.
It is a Government body with a website at www.lppeh.gov.my

On exploring their website I found their 'Code of Conduct' ( https://lppeh.gov.my/WP2016/code-of-conduct/ ) which states 'A registered estate agent shall not accept fees from more that one client in any one transaction'.
This seems to me to be exactly at odds with the practice in Penang, of demanding commission from both buyer AND seller.

Now some may say 'what's the problem, that's common practice in some countries', including the US apparently. But it's my understanding that the buyer actually gets something for their money in the US - as in, the Agent acts as a finder/researcher for the buyer, and may negotiate on the buyers behalf. But in the case of Penang, the Agent could not explain what she does FOR ME to earn her commission. Indeed, I see a massive conflict of interest here.
If I am a Seller I want the Agent to work for ME alone, and to extract the maximum value in my sale. I chose her and I engaged her. I expect her to obtain the maximum price possible for my property - and of course this increases her commission too.

What does the buyer get for the payment of 1% commission?
In Penang the Buyer pays the Agent a 1% commission for the pleasure of having top dollar extracted from them. Nothing else it would seem. How is that right?

When I told the Agent I wasn't happy about this demand for commission, she obviously wasn't impressed. Now here's the rub. Imagine there's another interested buyer, perhaps with a lower bid, but a more 'compliant' attitude to paying her the 1% commission. There's a clear conflict of interest here, because potentially the Agent gets to 'select' which buyer (and which bid) she will relay to the owner, The bidder who is willingly paying her commission will be her favored buyer, not the one refusing to pay her a commission for the simple task of opening the apartment door for a viewing. I guess this is why the LPPEH put that clause in the Code of Conduct. Anyone can see the conflict created by working both sides of the deal.

I really found it hard to believe that the property agents of Penang are getting away with this, and I was fascinated to know if the LPPEH are really ignorant of the practice. So I wrote to them and asked! They came back asking for more details of my experience, which I duly forwarded. They said they would investigate and get back to me.
That was back in late April.

I gave them more than 4 months before contacting them again (by email, to the same individual I dealt with at the outset). There was no response.
I called them up last week and asked what became of their 'investigation'. The answer was - it's still errr....ongoing. The person on the line made excuses about somebody leaving the LPPEH and this was causing delays. I tried engaging them in conversation about their own experience of Penang Agency charges. They professed ignorance and surprise, and promised 'to keep investigating'.

So that's where things stand at present. I suspect I'll hear nothing further unless I keep pestering them, which is really tiresome and pointless. I was curious how they could allow this blatant breach of their own 'code of conduct' to continue. If they were really surprised or shocked by it I'd expect immediate action. This lethargic response speaks volumes for their interest in the enforcement of their own rules.

Penang Buyer Beware!
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Old Aug 30th 2022, 3:28 pm
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Default Re: Property Agent Commission in Penang

I have not been in the process of buying property in Penang. But have been renting properties. In all cases was there a similar situation: the agent acting on behalf of the owner also demanded pay from the prospective tenant (i.e. me). Just like you I considered that a "conflict of interest", but I didn't want to make too much of a fuss about it.
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Old Sep 19th 2022, 5:04 pm
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Default Re: Property Agent Commission in Penang

Originally Posted by Flyguy
I recently made an enquiry on a property in Penang, an apartment that had caught my eye. I went along to view it and was quite interested. While discussing the price with the selling Agent she mentioned that I would have to pay her a 1% commission. I was surprised to hear this because I've purchased property in KL and the Agent commission was paid by the seller (the owner). But she insisted that "in Penang it is different - the seller pays 2% and the buyer pays 1%".
I made inquiries about this afterward, and it seems to be the standard practice indeed. But I have major issues with it, and it really puts me off the whole idea of buying anything in Penang.

Having returned home to KL I wanted more info on this peculiarity, so had a look for a 'governing body' for property agents in Malaysia, and indeed there is one. It is 'The Board of Valuers, Appraisers, Estate Agents and Property Managers', or LPPEH for short.
It is a Government body with a website at www.lppeh.gov.my

On exploring their website I found their 'Code of Conduct' ( https://lppeh.gov.my/WP2016/code-of-conduct/ ) which states 'A registered estate agent shall not accept fees from more that one client in any one transaction'.
This seems to me to be exactly at odds with the practice in Penang, of demanding commission from both buyer AND seller.

Now some may say 'what's the problem, that's common practice in some countries', including the US apparently. But it's my understanding that the buyer actually gets something for their money in the US - as in, the Agent acts as a finder/researcher for the buyer, and may negotiate on the buyers behalf. But in the case of Penang, the Agent could not explain what she does FOR ME to earn her commission. Indeed, I see a massive conflict of interest here.
If I am a Seller I want the Agent to work for ME alone, and to extract the maximum value in my sale. I chose her and I engaged her. I expect her to obtain the maximum price possible for my property - and of course this increases her commission too.

What does the buyer get for the payment of 1% commission?
In Penang the Buyer pays the Agent a 1% commission for the pleasure of having top dollar extracted from them. Nothing else it would seem. How is that right?

When I told the Agent I wasn't happy about this demand for commission, she obviously wasn't impressed. Now here's the rub. Imagine there's another interested buyer, perhaps with a lower bid, but a more 'compliant' attitude to paying her the 1% commission. There's a clear conflict of interest here, because potentially the Agent gets to 'select' which buyer (and which bid) she will relay to the owner, The bidder who is willingly paying her commission will be her favored buyer, not the one refusing to pay her a commission for the simple task of opening the apartment door for a viewing. I guess this is why the LPPEH put that clause in the Code of Conduct. Anyone can see the conflict created by working both sides of the deal.

I really found it hard to believe that the property agents of Penang are getting away with this, and I was fascinated to know if the LPPEH are really ignorant of the practice. So I wrote to them and asked! They came back asking for more details of my experience, which I duly forwarded. They said they would investigate and get back to me.
That was back in late April.

I gave them more than 4 months before contacting them again (by email, to the same individual I dealt with at the outset). There was no response.
I called them up last week and asked what became of their 'investigation'. The answer was - it's still errr....ongoing. The person on the line made excuses about somebody leaving the LPPEH and this was causing delays. I tried engaging them in conversation about their own experience of Penang Agency charges. They professed ignorance and surprise, and promised 'to keep investigating'.

So that's where things stand at present. I suspect I'll hear nothing further unless I keep pestering them, which is really tiresome and pointless. I was curious how they could allow this blatant breach of their own 'code of conduct' to continue. If they were really surprised or shocked by it I'd expect immediate action. This lethargic response speaks volumes for their interest in the enforcement of their own rules.

Penang Buyer Beware!
Well...I am not sure about your statement that "Buyers also pay commission to Seller' agent in USA"...its certainly not common practice here. I have bought and sold a number of properties. And NEVER had to pay the selling agent. In fact the standard practice is that the Seller pays his/her agent' commission and buyer pays no commission. In some cases buyer may be assisted by an agent also (Buyer's Agent) in searching and negotiating for properties .. Even in that case the buyers agent gets a share of seller's agent's commission (usually 50%) and NOT extra commission from the Buyer.

Having said that, i have encountered this (double sided commission) in some places in Asia and am perturbed by such practice, i think its fundamentally unethical if the seller's agent gets a commission from both parties, then whose' interest do they represent??? ( oh sorry .. missed out that they represent their 'own' interest' ..hhahahah a number of negative outcome are possible in this situation:

- Agent will only be interested in a sale .. whether it represents seller' or buyer' interest or not
- Agent may decide to shaft the seller ,if buyer proposes a better commission payout in exchange for concessions from seller
- if buyer's agent also gets double sided commission there is obvious case of collusion

Of course there may be some good eggs out there .. (its funny that we have to look for few good eggs,,,while we should be wary of few bad eggs).. the lack of regulatory insight/industry standards keeping (like you noted above) leads to generalized corruption and maleficence.

Another common practice I have noticed in Asia is NOT declaring commission upfront, how much and who will pay? leading to last minute holding the deal hostage situation. And one more shoddy practice. The agents (sellers' or buyer's) will not provide information about the owner of the property itself.. fearing that people will bypass them and buy directly from the owner .. haahaha
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Old Sep 22nd 2022, 1:30 pm
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Default Re: Property Agent Commission in Penang

Originally Posted by Flyguy
I
I really found it hard to believe that the property agents of Penang are getting away with this, and I was fascinated to know if the LPPEH are really ignorant of the practice. So I wrote to them and asked! They came back asking for more details of my experience, which I duly forwarded. They said they would investigate and get back to me.
That was back in late April.

I gave them more than 4 months before contacting them again (by email, to the same individual I dealt with at the outset). There was no response.
I called them up last week and asked what became of their 'investigation'. The answer was - it's still errr....ongoing. The person on the line made excuses about somebody leaving the LPPEH and this was causing delays. I tried engaging them in conversation about their own experience of Penang Agency charges. They professed ignorance and surprise, and promised 'to keep investigating'.

So that's where things stand at present. I suspect I'll hear nothing further unless I keep pestering them, which is really tiresome and pointless. I was curious how they could allow this blatant breach of their own 'code of conduct' to continue. If they were really surprised or shocked by it I'd expect immediate action. This lethargic response speaks volumes for their interest in the enforcement of their own rules.
Just to update you all on that complaint I made to the LPPEH back in April.
Still no comment or response from them. So much for their 'Code of Conduct'. Just another rule that everybody ignores.
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Old Sep 23rd 2022, 3:24 pm
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Default Re: Property Agent Commission in Penang

In all the years in Malaysia I never heard about a commission that has to be paid by the buyer/tenant. Certainly I would not pay. I also know that it is illegal, but I am not surprised that the LPPEH ignores it.

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