Going through an independent broker for properties sold in the primary market
As I’ve mentioned in previous articles, the one factor that can make or break your experience in real estate investing is your broker. When buying properties from the primary market (or properties that are yet to be built), you may choose to go with an in-house agent/broker or an independent broker. It’s common practice for buyers to go through an in-house agents since, after all, they’re the most convenient to approach. This article will argue why it’s better to go through an independent broker.
An in-house broker is a real estate broker who is employed by a real estate development company to help sell their inventory of properties. They get a basic monthly allowance (more or less based on minimum wage) and sales commissions for each property they sell. They also have to hit sales quotas to continue to be employed.
An in-house broker may be a licensed broker or an accredited sales person (For simplicity, we will refer to salespersons as “agents”). Agents are accredited with the Professional Regulation Commission (PRC), and are allowed to perform the simpler tasks of brokers such as property viewings and general paperwork. Only licensed brokers are allowed to sign legal documents related to the real estate investment transaction. An agent’s job generally ends after the buyer has paid the 20% downpayment since it would be the developer’s back-office (e.g. Amicassa of Ayala Land) who will take care of the rest of the requirements.
More likely than not, when you visit a real estate developer’s showroom, you will be approached by an agents instead of a licensed broker. You will likely only deal with this broker throughout your transaction, unless major issues arise in which the licensed broker will need to step in. Some developers have a ratio of as many as 20 accredited brokers to 1 licensed broker. This makes it easy for the developer to reach more potential customers for their properties.
Generally, in-house agents have access to all the properties of their developer. Their focus in particular projects/developer makes them more knowledgeable with the technical details and more up-to-date with the availability of units. However, in-house agents are not allowed to sell properties in the secondary market.
One disadvantage of in-house brokers is that they are not allowed to sell properties of other developers. As such, they have a limited view on the general property market. They may know some facts, but they would unlikely reveal facts that would put their property on a disadvantaged. Typically when asked, they will argue that their properties will always be superior to comparable properties in surrounding areas.
Moreover, sales of in-house agents are also limited by the number of projects their employer has to offer. Once the developer runs out of new developments, agents are left with nothing else to sell and they’re forced to move to another developer.
For these reasons, it’s not surprising that the turnover rate of these agents is quite high. The agent you have been coordinating with may transfer to another company. Problems arise when your agent promised you certain things that he/she will deliver. In this case, you’ll be passed to a new agent to whom you will have to initiate discussions with. Things previously agreed on will likely be forgotten.
Independent licensed broker (ILB)
An independent broker (hereinafter referred to as “ILB”) is a licensed real estate broker who is not tied to one particular developer. Aside from pre-selling properties, ILBs can sell pre-owned properties or properties in the secondary market. ILBs do not get any fixed salary and is rewarded solely with sales commission. They may or may not be associated with real estate groups such as PAREB, or RE/MAX. Some independent brokers may hire their own accredited brokers who will act as their agents, in the same way real estate developers do.
Because ILBs have a much broader view of the general real estate market, they can give you multiple recommendations depending on what you’re looking for, and are not limited to one developer alone. ILBs even have access to private individuals and companies who may be selling their properties at attractive prices that a developer could never sell at. ILBs can also help facilitate loan applications for the banks they are accredited with.
The disadvantage of ILBs is that they are less knowledgeable with the technical details of particular projects given the sheer number of other projects that they can offer. To address this problem, developers (e.g. Rockwell, Ayala Land, Megaworld, etc.) have established broker relations groups that aid ILBs in project presentations.
Another advantage of ILBs is their expertise in the secondary market. Clients who intend to re-sell or lease out properties they bought from the primary market, ILBs can guide them with the whole process: pricing of the property, legal and procedural requirements, etc.
Why go with ILBs?
Luckily, you can choose the best of both worlds. You can get an ILB to represent you and have him/her coordinate with the in-house agents. This option will NOT cost you anything since it will be the developer/seller paying for their professional fees.
This model has been so successful that developers (i.e. Ayala Land, Rockwell Land, Ortigas & Co. etc.) have established Broker Relations Groups to handle leads from independent brokers. In fact, sales of ILBs have reached as much as 30% of total sales for certain projects.
Let your independent broker do the follow-ups, legwork, review of paperwork, etc. Get an unbiased opinion with regard to the property. Since ILBs handle pre-owned properties, they know what to watch to check (see article on What to Check for Newly Turned Over Units). Simplify your life by having your ILB take care of leasing out or re-selling the property you bought. Work with an ILB.
Disclaimer: This material, which is strictly for information purposes only. The views and opinions expressed in this article are those of Juan Patag’s and do not necessarily reflect the position of RE/MAX Capital, or any other RE/MAX franchise. Any information is subject to change without prior notice. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Information Each RE/MAX franchise is independently owned and operated.