What is “Profiteering” Within the Context of Real Estate?
Profiteering may refer to situations when someone attempt to take advantage of circumstances to make excessive profits. It is the generation of unfair or unauthorised profits through manipulation of prices.
Under Schedule 7 of the Board of Valuer’s, Appraisers and Estate Agents Rules 1986, the fee chargeable for the sale of land and building should not exceed 3% i.e. the maximum fees that an Agent or Negotiator can obtain on a property worth RM500, 000 would be RM15,000. This ruling is in place largely to protect the public from exploitation or from profiteering.
It’s important to note that when an Agent is appointed there is a creation of what is known as agency law under the contracts act. Here, an agent is seen as one who legally steps into the shoes of the owner. The agent cannot exceed the authority placed on him by the vendor.
Examples of profiteering might include one of the following scenarios:
Collecting higher fee than as prescribed by law.
Collecting differential sum from seller’s price and selling price e.g. seller wants a minimum of RM500, 000 but agent sells for RM600,000 and the agent takes the profit of RM100,000
The owner of a 70,000sft land want to sell it at RM120. The agent hikes it up by RM5 and sells it for a profit of RM350, 000
The fees payable for an aborted deal and on forfeiture should be 50% of the fees or 50% of the Earnest deposit whichever is lower and not just 50%.
What You Can Do
Always ask the agent the Comparative Market Analysis (CMA) comparative values in the vicinity.
Engage the services of a Valuer to do a valuation on the property which is acceptable by the banks.
Check transacted values from National Property Information Centre (NAPIC).
Agree to pay the prescribed fee than the differential sum.