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Process Analysis of the Property Market

Autor:   •  March 15, 2016  •  Research Paper  •  1,924 Words (8 Pages)  •  968 Views

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Process Analysis of the Property Market

Transaction without Agency

A typical direct transaction in the property market without any agency firm, involves merely the buyers as the customers and the sellers as the property developers. This means that the buyers would have approached the developers to purchase an apartment directly. In 2012, two out of every 3 purchases were brought from the developers directly (ProperSquare, 2013).

Developers who wish to sell units in an uncompleted development must first obtain a sale license (E-SingaporeProperty.com, 2012). Upon approval, the developer then launches early sales and previews to attract crowds, with first pick and discount on prices to stimulate demand and create a buying momentum (E-SingaporeProperty.com, 2012). After the first preview session among shareholders and business associates, the preview is then open to pre-registered buyers. The discount is removed for transactions after the preview period and there is usually a better choice of units for the earlier buyers. Show flats are constructed at the site for visitors to have a look and imagine how their home would look with a similar interior, using ambience marketing to try to encourage the purchase propensity of such big ticket items. Developers in Singapore may conduct these launches through their in-house marketing team, if they do not employ external real estate agencies to do the marketing for them.

Assuming that there is no agent involved, the developer may choose to slowly reduce the price to clear the remaining units or to stimulate demand in a sluggish market (E-SingaporeProperty.com, 2012). A buyer who decides not to purchase the unit may withdraw any time before booking the unit, without any penalty, even after signing the cheque for the option fee during pre-registration.

Transaction with Agency

Having an agency firm as the middleman is usually a more common practice, as the agent can assist the buyer with the paperwork for the purchase and advise him on his options available. The agent also helps the seller to market the development.

In Singapore, buyers do not pay the agent fees. As the seller, the developer pays the agent for each successful sale, and the agency splits that amount with the agent (E-SingaporeProperty.com, 2012). However, the developer would have already factored in the agent fees in the pricing of the units, and hence, would have been charged as part of the overall cost.

Upon approval of his sale license, the developer engages an agency firm to use their expertise to advertise and market the launch. In this aspect, he is able to save on staffing. The preview session and official launch are held accordingly with the processing of sales handled by the developer, while agents get buyers in to clinch sales and receive a cut as commission (E-SingaporeProperty.com, 2012).

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