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While some see real estate agents as the backbone of the property market, others question the value of brokers, especially in a lease-heavy market. Yes, there are those with the knowledge and skill to help buyers and sellers close a secure, cost-effective and lucrative deal. But many tenants have also dealt with agents who only show up to claim their commission, without doing anything to earn it.
Property Weekly speaks with real estate agents to find out the challenges of working in the local property market.
“Most agents in the market operate with proper licences and maintain good ethics,” says Zarah Evans, Managing Partner of Exclusive Links. “However, there are a handful of underhanded agents who cause distrust in the market and make it hard for genuine professionals to earn the respect they deserve.”
There has been a lot of effort to root out shenanigans in the industry since the upturn in the market last year.
“Regulations are making it more difficult for unlicensed freelancers to work freely in Dubai,” says Evans.
“We are even seeing some of the larger real estate agencies being penalised for not following the labour laws of Dubai and the Real Estate Regulatory Agency [Rera]. As brokers, we are not only representing the companies we work for and a developing industry, but also a country offering many opportunities.”
Sellers making abrupt changes to the listed price of a property is a common problem in the industry. There have been many instances where deals are not completed because the seller would suddenly change the price. Kalpesh Sampat, Director of SPF Realty Real Estate, believes sellers should not be allowed to modify prices unilaterally at any point.
“In all the attempts to rein in or cool down price increases, the most important solution to achieve price stability would be to make it mandatory for owners and sellers to include a 15- or 30-day price validity in the Rera listing form that they sign,” says Sampat. “Non-compliance could be punishable by a fine. This is implemented in all mature property markets and is a key step towards attaining price and market stabilisation,” he says.
“This will bring a lot more stability to the market and create less frustration. Many buyers often give up after encountering several greedy sellers who do not stick to their commitment, as there is no adverse consequence to reneging on the agreement.”
Agents are also not told in advance about any change in the procedure or any new requirement for property transfers, says Wasim Tariq, Director of Aaj Property. “The agents learn about a new change in the procedure only when they visit the satellite office or from other brokers,” he says.
Evans adds there is not much support in educating the public when a new law is passed and implemented.
“Often a new law or a change in the law is implemented and real estate professionals are not informed or are informed with no lead-up or warning,” says Evans. “The industry is then left to implement and explain such changes to customers or the public, who at times question the motives, professionalism and knowledge of the industry.”
The transfer fees hike affected the industry directly, since this was implemented without prior notice or advice from the authorities, says Evans.
“The increase of the transfer fee from 2 per cent to 4 per cent initially leaked into the market as a rumour, which not only unsettled buyers and sellers but also caused a huge reaction from real estate professionals,” she says. “Despite questions and arguments being put forward to the Dubai Land Department [DLD] on how to manage this increase, it was confirmed and implemented by the authorities overnight and some deals fell apart as a result.”
Sampat adds that it is imperative that changes in the law, rules and fees should be done gradually and in a timely manner.
Executing an MoU
There are also cases where sellers back out of their obligation even after signing an agreement with the buyer, says Sampat.
“As recommended by Rera, the norm is for the seller to give a 10 per cent security cheque — although not all sellers agree to this—and the buyer to pay a 10 per cent deposit to make the memorandum of understanding (MoU) enforceable by the DLD,” says Sampat.
“The security cheque should be made mandatory instead of being voluntary, ensuring that sellers meet their obligation and do not back out of a valid agreement that they have signed, provided the buyer has completed all obligations.”
Lack of loyalty from potential buyers and sellers is also a problem, says Evans. “With the exception of a few, Dubai is still very much a speculator’s market, where everyone is chasing the best deals regardless of service levels or other consequences. Goalposts move and buyers and sellers list and shop for property with several agents, creating a false demand,” she adds.
There are also cases when a broker would unwittingly market projects that have been put on hold. Says Tariq: “The agents would spend large sums to market off-plan projects, but sometimes the Rera website would show those projects to be on hold, even if construction had started.
“This is because either some documents are missing or the website has not been updated. In either case, if an agent acquires marketing approval from the DLD and markets a property that is registered as on hold on the Rera website, this creates a negative impression of the broker,” says Tariq.
A delay in issuing the title deed leads to a delay in the sale and the transfer of ownership, says Evans. “Delays in issuing title deeds will ultimately restrict trade in the market, but this will ease as more title deeds are in circulation. With more title deeds issued, more properties will also be sold with a title deed, so you don’t need to wait longer,” she says.
Mortgage caps There were also uncertainty regarding mortgage caps and many brokers were unsure of the exact figures.
“Suggestions were made for a 50 per cent lending cap, but this never came to light. In the fourth quarter, the recommended mortgage caps for locals and expats were announced and were proposed to be implemented this year,” Evans says. “While all we read and hear confirmation that this has now been implemented, the Central Bank is still to meet with all the lenders to confirm this, therefore this is still a grey area.
“Until it is confirmed, it continues to create questions in the market and buyers aren’t sure what they can and can’t borrow and, therefore, what they can and can’t buy.”
Evans points out that laws are in place not to restrict trade, but to improve standards. “The introduction of satellite transfer offices has ceased some of the activity at the DLD, which creates a positive impact,” she says. “On the other hand, while understanding the necessity of labour and Rera requirements for agents to operate, it can be frustrating from an employer’s perspective that agents have to obtain a visa and a Rera card before they can advertise properties.
“For real estate agents to advertise and transact, they first need to secure a Rera broker’s card. It is often not until then that a real estate firm can use the full potential of an agent. For agents to get their broker’s cards, they need to have a residency or work visa. So when employing agents, in some cases it can take up to six weeks to get their broker’s cards issued. During this time agents are unable to advertise, close deals and realize their full potential.
“This can be relaxed by issuing probation visas and Rera cards.”
Brokers are also responsible for upholding the integrity of the industry.
“There are agents who do not care about their jobs and are becoming a bad influence on other agents who have a good reputation and take pride in their work,” says Jack Ward Senior Sales Consultant — Dubai Marina at Ere Homes.
“These agents are polluting the minds of the people, creating the impression that all agents follow the same objectionable practices.”
Prospective buyers often call agencies to inquire about properties being advertised and these initial contacts between buyers and property agents are critical in building client relations. However, as Ward explains, these interactions have also been a major cause of negative sentiment towards real estate professionals.
“Buyers can come in contact with different agents and would probably speak with a few bad ones who would not show concern about the client’s interests, would not offer good advice and would not make the client feel comfortable about buying the property,” says Ward.
“When the same buyer comes in contact with a good agent, the buyer is now reluctant to heed the agent’s sincere advice because of the experience with bad agents. Most clients also tend to generalize their view, thinking that all agents would sell them anything in order to secure their commission. The reputation of incompetent agents can hinder the completion of a good deal and corrupt people’s minds.”
A directive came into force at the end of last year that makes it illegal for real estate brokers to cold-call property owners.
“Agents of reputed and established real estate companies that have been in the market for about five to seven years would have records of the people they have dealt with in the past. So occasionally agents will go back to those clients in their database to inquire if they are planning to buy or sell property.”
However, there is a big difference between an incompetent agent and a professional agent in handling cold-calls. Ward says a professional agent would effectively use database information as reference to reconnect with previous clients, whereas a bad agent would ring any person without verifying if the firm has previously done business with the prospective client.
“The market still has agents who practise inappropriate cold-calling methods where the agent has absolutely no clue who they are interacting with,” says Ward. “This becomes a problem when the person receives several calls in a week from different agents asking the same questions — that can be annoying.
“Good agents are not affected by the new regulation because they only call clients who have done business with them. However, even if cold-calling is illegal, there are databases containing contact details of people that are being sold for a few thousands dirhams. This needs to be strictly regulated with a stiff penalty given to people who are caught distributing confidential information.”
Advertising on property listing websites is not very well regulated. “There are several agents who advertise online properties that are not actually available for sale,” says Ward. “The reason for this is to attract and connect with potential buyers, and agents would then later offer them the property they are actually selling.
“As per regulations, an agent should have a unique reference number called the special transaction register number for each property so that there is only one listing for each agent for every property that is available for sale. However, the law needs to be strictly enforced by identifying and monitoring property listing websites as this will help buyers, sellers and agents.
“Rera has implemented laws to make the market more reliable and cleaner, but they need to be enforced more strictly so that bad agents will not slip through,” he says.
Source: Hina Navin, Special to Property Weekly